GDP growth to remain at 6.5% in 2022 – Citi

American banking giant Citi is still expecting some downside risks from higher commodity costs and global slowdown despite the stronger-than-expected 8.3 percent gross domestic product (GDP) growth in the first quarter of the year.

Nalin Chutchotitham, economist for the Philippines at Citi, is maintaining its GDP growth forecast at 6.5 percent this year, lower than the seven to nine percent target penned by economic managers.

“Q1 GDP rose 8.3 percent year-on-year, exceeding market expectations, supported mainly by greater reopening. We maintain 2022 GDP forecast at 6.5 percent, as some downside risks remain from higher commodity costs and global slowdown,” Chutchotitham said.

The Philippines emerged from the pandemic-induced recession that stretched five quarters with a GDP expansion of 5.7 percent last year, reversing the 9.6 percent contraction booked in 2020 as the economy stalled due to strict COVID-19 quarantine and lockdown protocols.

The country’s growth momentum stretched to four quarters with a GDP expansion of 8.3 percent in the first quarter despite the resurgence of COVID-19 cases in January due to the more contagious Omicron variant that resulted in the reimposition of Alert Level 3 in the National Capital Region (NCR) and nearby provinces.

As infections declined from daily record levels in January, the government gradually eased the lockdowns to Alert Level 2 in February and eventually to Alert Level 1 in March resulting in the further reopening of the economy.

Chutchotitham said household consumption expanded by 10.1 percent with stronger contribution from food and non-alcoholic beverages as well as higher spending on recreational activities, housing and utilities, transport, and education.

While government consumption slowed, Chutchotitham said gross fixed capital formation maintained a strong pace of 11 percent, mainly led by construction and transport equipment.

For the first quarter, public construction contracted by 4.9 percent due to the delay of new projects during the election period.

Socioeconomic Planning Secretary Karl Chua said the stronger growth was due to the change toward “endemic mindset” where 70 percent of the country came under COVID-19 Alert Level 1 by end-March.

“We continue to expect some downside risks from global slowdown and impact from commodity prices on private sector activity, but there could be upside risks from election campaign activities in Q2,” Chutchotitham said.