ADB hikes Philippine inflation forecast to 5.3% for 2022

MANILA, Philippines — The Asian Development Bank (ADB) raised its inflation forecast for the Philippines this year, amid rising global energy and commodity prices.

According to its Outlook 2022 report released yesterday, the ADB now expects inflation in the country to quicken to 5.3 percent this year, up from the 4.9 percent forecast it provided in July and the 4.2 percent estimate in April, citing sharp upward shocks to global energy and commodity prices.

“The negative impact of natural disasters on domestic agricultural supply will likely lead to higher food prices until the end of the year,” it said.

ADB’s revised inflation forecast for the Philippines is slightly lower than the 5.4 percent forecast of the Bangko Sentral ng Pilipinas, but higher than the BSP’s two to four percent target for the year.

The country’s average inflation for the January to August period was at 4.9 percent.

For next year, ADB kept its inflation forecast for the Philippines at 4.3 percent, as it expects steady economic growth to keep prices stable and fuel prices to go down.

While the ADB made an upward adjustment to its inflation forecast for the country for this year, it maintained the gross domestic product (GDP) growth forecast of 6.5 percent for this year.

Last July, the ADB had hiked its GDP growth forecast for the country for this year to 6.5 percent from the six percent estimate it gave in April.

ADB’s GDP forecast for the country is at the low end of the government´s 6.5 to 7.5 percent economic growth target for the year.

The country’s GDP growth was at 7.8 percent in the first semester.

ADB expects a rebound in domestic demand and the easing of pandemic-induced mobility restrictions to support the country’s growth this year.

“The normalization of socioeconomic activity will usher the Philippine economy to a steady, pre-pandemic pace of expansion,” ADB Philippines country director Kelly Bird said.

“The recovery in tourism and private investments, coupled with sustained public spending on large infrastructure projects and remittances from overseas Filipinos, will bolster the country’s economic recovery this year,” he said.

ADB also retained its 6.3 percent GDP growth forecast for the country for next year, with the monetary policy tightening and rising inflation seen to affect domestic demand.

“The Philippines is poised to grow positively this year and next year mainly due to domestic demand. Broad-based demand will be fueling growth,” Dulce Zara, senior regional cooperation officer for the Southeast Asia department at the ADB said in a webinar yesterday.

ADB, however, cited downside risks to the growth outlook such as a sharper slowdown in advanced economies, heightened geopolitical tensions, and global commodity prices staying elevated due to the Russia-Ukraine conflict.