The Asian Development Bank on Wednesday kept its growth forecast for the Philippines at 4.5 percent in 2021 and 5.5 percent in 2022, taking into account signs of a gradual recovery from the 9.6-percent contraction last year because of the COVID-19 pandemic.
It noted in its Asian Development Outlook 2021 Update the upturn in domestic demand and favorable external trends aligned with the projections it announced in April.
“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 vaccination program,” the report said.
It said the main risk to the growth 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 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.
The government focused on vaccinating Filipinos living in main urban areas such as Metro Manila, which records the highest incidence of COVID-19 cases. As of Sept. 15, 84 percent of Metro Manila residents aged 18 and older, or 8.2 million people, received at least one dose of a COVID-19 vaccine, and 63 percent were fully vaccinated.
The government said that as of mid-Sept. 22 million people nationwide received a first jab and 17.7 million were fully vaccinated.
Public infrastructure disbursements rose 39.1 percent year-on-year in July, and the government was on track to achieve its target of raising infrastructure spending to at least 5 percent of GDP in 2021 and 2022, up from 4.8 percent in 2020.
“The economic recovery will be boosted by the government’s policy reforms and expansionary fiscal program, with a fiscal deficit of 7.5 percent of GDP expected in 2022,” the ADB said.
It retained the inflation forecasts at 4.1 percent in 2021 and 3.5 percent next year. With inflation expected to fall back within the central bank’s 2 to 4 percent target range and a gradual recovery in domestic demand, the government’s monetary policy stance is expected to stay accommodative, it said.
The report said the country’s current account surplus would narrow to a revised 1.0 percent of GDP this year and 0.8 percent in 2022, with a stronger-than-expected rebound in imports, including for capital goods and raw materials.
A pickup in merchandise exports and receipts from business process outsourcing and higher remittances from Filipinos overseas would help lift the current account, it said.
The interagency Development Budget Coordination Committee earlier lowered its 2021 growth forecast to a range of 4 percent to 5 percent from the previous estimate of 6 percent to 7 percent because of the latest rounds of lockdowns imposed in Metro Manila and adjacent provinces that could impact full-year growth.