A strong rebound in domestic demand with the easing of COVID mobility restrictions will support robust growth for the Philippine economy this year despite higher inflation due to global and local price pressures, according to a report released Wednesday by the Asian Development Bank (ADB).
The Philippines’ gross domestic product (GDP) will grow 6.5 percent in 2022, up from ADB’s April forecast of 6 percent.
The growth projection for next year is kept at 6.3 percent as monetary policy tightening and accelerating inflation both crimp domestic demand.
Inflation is now expected to quicken to 5.3 percent, up from the July forecast of 4.9 percent, underpinned by sharp upward shocks to global energy and commodity prices.
The negative impact of natural disasters on domestic agricultural supply will likely lead to higher food prices until the end of the year.
ADB maintained its inflation forecast for 2023 at 4.3 percent since the return to steady economic growth is seen to keep inflation relatively stable, and with energy prices likely to decelerate.
“The normalization of socioeconomic activity will usher the Philippine economy to a steady, pre-pandemic pace of expansion. The recovery in tourism and private investments, coupled with sustained public spending on large infrastructure projects and remittances from overseas Filipinos, will bolster the country’s economic recovery this year,” ADB Philippines Country Director Kelly Bird said.
However, the ADB report said downside risks to the growth outlook could come from a sharper slowdown in major advanced economies, heightened geopolitical tensions, and a possible sustained elevated global commodity prices due to the Russian invasion of Ukraine.
Spending on recreation, travel, and restaurants bounced back in the first half with household consumption rising 9.3 percent from 0.9 percent in the first semester of 2021. It was the most significant contributor to GDP growth in the period.