HEADWINDS TO SLOW PHL H2 GROWTH-THINK TANK

INTERNATIONAL think tank Fitch Solutions said the Philippines is headed to slower growth in the second half of the year, as challenges to the country’s economic expansion will begin to intensify.

In an analysis published by Fitch Solutions on Thursday, the think tank forecast growth to average at 6.6 percent in 2022.

With the country’s first- quarter growth hitting 8.2 percent and the second- quarter gross domestic product (GDP) expansion at 7.4 percent, this means that Fitch Solutions expects the country to grow by an average of 5.4 percent for the second half of the year with their current forecast.

“Overall, GDP growth in the first half of the year benefited from the reopening of borders in February and election- related spending. Moreover, a relatively accommodative central bank has also supported consumption and investment to some extent. These tailwinds helped offset external headwinds stemming from elevated energy prices, a slowdown in the world

economy, and tightening global monetary conditions,” Fitch Solutions said.

“However, we believe that these tailwinds will continue to fade over the coming months, while growth headwinds intensify, leading to slower growth in the second half of 2022,” it added.

Fitch Solut ions said these “mounting headwinds” come from a combination of softer global demand, elevated energy prices and tightening monetary policy towards the latter part of the year.

With a now softer global growth outlook— which the International Monetary Fund ( IMF) forecasts at 3.2 percent— external demand will further be dampened for Philippine exports and is expected to affect growth.

Fitch Solutions, in particular, forecasts Philippine exports to expand by 6 percent in 2022, down from 7.8 percent in 2021. The think tank said the export slowdown has already been prefaced by the 1-percent export expansion in July—which was mainly attributable to the fall in sales for electrical, electronic equipment.

Given that the Philippines is a net importer of energy, the country’s growth is also expected to be weighed down by elevated energy prices.

Fitch Solutions said elevated energy prices have led to a drastic increase in the Philippines’ import bill, and in turn widening the trade deficit. The think tank also expects energy prices to remain elevated over the remainder of 2022.

On the consumption front, the research firm said rising inflation will continue to erode household purchasing power. The tank forecasts private consumption to grow by 7.5 percent in 2022, signaling a deceleration from the average 9.3 percent growth in the first half of the year.

“Against the backdrop of the ongoing Russia-ukraine war and adverse weather conditions in a number of food-producing countries in the region, energy and food prices will continue to be a significant source of upward price pressure in the Philippines,” Fitch Solutions said.