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Philippines Economy on Pace to Pre-Pandemic Levels This Year

Philippines GDP Growth Beats Forecast as Recovery Takes Root

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The Philippine economy expanded more than expected in the fourth quarter, lending a firmer base to a recovery that policy makers expect will power output to pre-pandemic level this year. 

Gross domestic product in the three moths through December grew 7.7% from a year ago, the Philippine Statistics Authority said Thursday, versus a median estimate for a 6.3% advance in a Bloomberg survey. Economic growth in the third quarter was at 6.9%.

“The door to our economic recovery is now fully open,” Economic Planning Secretary Karl Chua said in a briefing. With more Filipinos allowed to return to work and earn income, Chua expects GDP to recover to pre-pandemic level in 2022.

The benchmark Philippine Stock Exchange Index rose 0.3%, defying declines elsewhere in Asia. The peso was down 0.3% against the dollar.

Philippines Economy on Pace to Pre-Pandemic Levels This Year

For 2021, GDP expanded 5.6%, compared with a 5.1% survey median, a rebound from the 9.6% contraction the previous year, which was the biggest decline since World War II.   

Even absent a favorable statistical comparison, the government expects the economy to expand as fast as 9% this year. Still, recovery prospects are challenged by monetary policy tightening elsewhere and spikes in Covid infections that typically hurt the consumption-driven economy. 

What Bloomberg Economics Says...

“With the omicron variant driving an exponential increase in infections from early January, we see a sharp and short -- but potentially limited -- hit to activity in 1Q, similar to the experience of much of the rest of the world. Even so, the pandemic’s enduring risks to the recovery should keep Bangko Sentral ng Pilipinas accommodative through at least the first half of the year.”

-- Justin Jimenez, Asia economist

Click here to read the full note

The fourth quarter economic performance is “broad based,“ said Bangko Sentral ng Pilipinas Governor Benjamin Diokno, who earlier this month flagged that the key interest rate will remain at a record low through the first half of the year.

Here are details on the economic performance:

  • All major economic sectors posted annual growth in the fourth quarter. Farm output swung to expansion, while industry and services sectors grew faster
  • On the demand side, household consumption growth quickened to 7.5% on year last quarter. Expansions in investment and government spending slowed

Recovery Road

The forecast-beating GDP and a hawkish Federal Reserve are unlikely to push the BSP to hike rates earlier, said Jonathan Koh, economist at Standard Chartered Plc. Fourth-quarter output is still below pre-pandemic trend and inflation is seen to moderate, said Koh, who expects the BSP to start raising rates only in the second half.

“While an omicron wave means the economy’s continued strong performance in the fourth quarter is unlikely to be repeated this quarter, we think growth will pick up again before long,” said Capital Economics Ltd. Asia economist Alex Holmes. Still, overall “recovery has a long way to go,” with output remaining in catch-up mode throughout this year.

Compared to the previous three months, fourth quarter GDP grew 3.1% on a seasonally adjusted basis. The survey median was for a 3% expansion.

The Philippines’ policy to move from pandemic to a more endemic approach to the coronavirus paves way for better economic performance, Chua said. With mobility restrictions expected to ease in the coming weeks, the country is “on track to rapid recovery,” he said.

©2022 Bloomberg L.P.