AMRO keeps PHL’S growth forecast despite headwinds
REGIONAL think tank ASEAN+3 Macroeconomic Research Office (AMRO) announced on Wednesday that it has retained its forecast of the Philippine economy’s growth despite external uncertainties and heightened headwinds.
In the conclusion of its Annual Consultation Report, AMRO said the Philippines is expected to post growth in gross domestic product (GDP) of 6.9 percent for this year.
“In 2021, the economic recovery was mainly driven by stronger investments and household consumption. The recovery is expected to broaden this year, with the private sector taking the lead in driving growth on the back of continued policy support,” AMRO said.
For next year, the think tank said growth will likely temper down to
6.5 percent. Both AMRO’S forecasts are within the government’s target growth range of 6.5 to 7.5 percent for 2022 and 6.5 to 8 percent for next year.
“Continued relaxation of the mobility restrictions will pave the way for stronger economic recovery. Government investment will continue to be a main driver of growth in 2022, while private investment may only improve moderately, in part due to impaired balance sheets,” the report said.
“Private consumption recovery will gain momentum, supported by better income and job prospects, and by presidential election-related spending,” it added.
The think tank, however, warned that the Philippine economy continues to face several risks and challenges.
“A potential resurgence of more vaccine-resistant Covid-19 infections remains a major threat to the recovery in the short term, and the impairment of firms’ balance sheets continues to pose a risk to the banking sector’s financial health,” AMRO said.
“The significance of these two risks may have abated somewhat; however, capital flow volatility is expected to rise in 2022 as global financial conditions are set to tighten. In addition, scarring effects caused by the pandemic have become clearer, raising the urgency to take action to build resilient, sustainable, and inclusive long-term growth,” the think tank added.
For consumer prices, AMRO projects the headline consumer price index (CPI) inflation to rise to 4.4 percent in 2022 before declining to 3.8 percent in 2023, given the supply disruptions from the war in Ukraine.
Amid these considerations, AMRO urged local policymakers to strike a good balance between supporting the recovery and safeguarding against risks.
“The fiscal consolidation plan should enhance fiscal sustainability without jeopardizing economic recovery. The pace of fiscal consolidation can be expedited once the private sector recovery becomes self-sustaining, by continuing to improve the efficiency of public spending programs, while enhancing revenue collection,” AMRO said.
“Both public and private efforts need to be synergized to mitigate the scarring effects from the pandemic and address the structural challenges to achieve a more resilient and sustainable long-term growth. In particular, concerted efforts should be made to digitalize the economy to enhance productivity and growth,” it added.