ADB maintains Philippine economic growth outlook at 4.5% for 2021, 5.5% for 2022

Manila-based multilateral lender Asian Development Bank (ADB) maintained its economic growth projections for the Philippines for this year and next year as it banks on the country’s ongoing vaccination drive against the COVID-19.

In the September update of its flagship economic publication, Asian Development Outlook 2021, released Wednesday, the ADB retained the growth forecasts of 4.5% in 2021 and 5.5% in 2022 for the Philippines.

These are the same projections pegged by the lender in the April and July editions of its economic publication.

The multilateral lender’s projections also align with the Duterte administration’s economic managers’ downwardly revised growth assumptions of 4% to 5% range for 2021.

“The Philippines’ economic growth in 2021 and 2022 will be supported by sustained growth in public infrastructure spending, improving consumer confidence, and progress in the national coronavirus disease (COVID-19) vaccination program,” the ADB said.

The ADB report noted "signs of a gradual recovery" in the country’s economy, with the upturn in domestic demand and favorable external trends aligned with the projections announced in April.

The main risk to the outlook is the spread of newer, contagious COVID-19 variants, which may result in the return of stricter containment measures and stall economic activity, the bank said.

“The economy has regained its footing and is on the right growth path. But the recovery remains fragile due to the threat posed by more infectious COVID-19 variants,” said ADB Philippines country director Kelly Bird.

“Vaccination remains key to the economy’s safe reopening. We are actively supporting the government’s efforts to achieve its national vaccination targets through our health-related assistance,” Bird said.

At a virtual webinar, ADB Macroeconomics Research director Abdul Abiad noted that there is a “good progress in vaccination in the National Capital Region (NCR)…the NCR, accounts for about 40% of GDP so activity will slowly open up and renormalize and provide a boost to GDP growth in the Philippines.

The ADB emphasized that the Philippine government has focused on vaccinating Filipinos living in main urban areas such as Metro Manila, which records the highest incidences of COVID-19 cases.

It said that as of September 15, 2021, 84% of Metro Manila residents aged 18 and older, or 8.2 million people, have received at least one dose of a COVID-19 vaccine, and 63% have been fully vaccinated.

Overall, as of mid-September, 22 million people nationwide had received a first jab and 17.7 million were fully vaccinated, it added.

The bank also noted that public infrastructure disbursements rose 39.1% year-on-year in July, and the government is on track to achieve its target of raising infrastructure spending to at least 5% of gross domestic product (GDP) in 2021 and 2022, up from 4.8% in 2020.

For her part, ADB senior regional cooperation officer Dulce Zara said that the bank has already considered the upcoming 2022 elections in its latest growth outlook.

“[B]ut we don’t see a major impact on the outlook simply because the economy is on its track to recovery. It is seen to be ramping up next year with investments in infrastructure,” Zara said.

The economic recovery will be boosted by the government’s policy reforms and expansionary fiscal program, with a fiscal deficit of 7.5% of GDP expected in 2022, according to the ADB.

“The National Employment Recovery Strategy adopted by the government in June 2021 focuses on recovery in quality jobs, upskilling workers, expanding social protection and active labor market programs,” the bank said.

Among the government’s priority policy reforms are proposed legislations to improve the investment climate, it said.

Inflation forecasts are unchanged at 4.1% in 2021 and 3.5% next year, according to the bank.

“With inflation expected to fall back within the central bank’s 2% to 4% target range and a gradual recovery in domestic demand, the government’s monetary policy stance is expected to stay accommodative,” it said.

The ADB report said the country’s current account surplus will narrow to a revised 1.0% of GDP this year and 0.8% in 2022, with a stronger-than-expected rebound in imports, including for capital goods and raw materials.

A pickup in merchandise exports, as well as receipts from business process outsourcing and higher remittances from Filipinos overseas, will help lift the current account, it said.—AOL/RSJ, GMA News