PHL economy seen to grow by 6% this year but still vulnerable to pandemic disruptions

THE PHILIPPINE ECONOMY will likely grow at a faster pace than expected this year even as it remains vulnerable to pandemic-related disruptions, GlobalSource Partners, Inc. said.

The New York-based market research firm said the country’s gross domestic product (GDP) will expand by 6% in 2022, higher than its previous 5.5% forecast.

“Considering expanding vaccination coverage and increased chances of less severe illness from COVID-19 (coronavirus disease 2019) infections in light of the experience with the Omicron variant, we are factoring in greater willingness among individuals to resume more normal activities and among health authorities to relax restrictions, although likely still in a one-step-forward-half-step-back fashion,” it said.

The projection is lower than the government’s 7-9% target.

Obstacles to economic growth such as weak labor markets and a reduced fiscal and monetary policy space along with supply chain disruptions remain, GlobalSource Partners said.

Economic growth could be supported by higher confidence that COVID-19 is becoming more endemic, which would push tourism and education recovery.

Risks to growth include more variants of the virus, along with geopolitical factors like the crisis in Ukraine.

The Philippine economy expanded by 7.7% in the fourth quarter last year for a full-year 2021 expansion of 5.6%. This reverses the 9.6% contraction in 2020, but is still lower than the pre-pandemic 6.1% expansion in 2019.

While GlobalSource expects 5.5% growth in 2023, this could be raised later this year with more information on how the next administration will address its budget constraints and create jobs.

As for political continuity after the elections, the research firm said Vice-President Maria Leonor “Leni” G. Robredo would likely take “an antagonistic stance.”

“After all, she has openly criticized the Duterte administration and is the clear opposition candidate,” GlobalSource said.

But the firm also said that policy continuity under Ferdinand “Bongbong” R. Marcos, Jr. could be questionable as well, noting that his proposals are similar to his late father and dictator Ferdinand Sr., which damaged government finances in the long term.

“These include the use of price stabilization mechanisms for politically sensitive goods such as rice and oil that were sound on paper but were in practice vulnerable to politicization and rent seeking and led to larger and larger public sector deficits,” the firm said.

“At a time when markets are eager to learn how the next government proposes to reduce the pandemic-induced jump in its debt ratio, one could understand why analysts would find such budget draining proposals unsettling.”

Mr. Marcos continued to lead in several opinion polls ahead of the May 9 polls. — Jenina P. Ibañez