MUFG maintains 6.5% growth projection for Philippines
IN light of the slower expansion anticipated in the second half of this year, MUFG Bank Ltd. maintained its 2022 economic growth projection for the Philippines at 6.5 percent, the lower end of the government’s adjusted target.
In a report released on Wednesday night, it noted that the Philippines’ real gross domestic product (GDP) growth in the first quarter (Q1) of 2022 exceeded expectations with a growth rate of 8.3 percent year over year, which was the highest since the second quarter (Q2) of 2021 and was partially attributed to low base effect.
Japan’s largest bank said the economy returned to pre-pandemic levels earlier than anticipated, thanks to strong GDP growth in the first quarter. However, slower growth is anticipated year on year for the ensuing quarters as low base effects fade and high levels of inflation have an impact on the ongoing recovery in private consumption.
“Prior to the release of Q2 GDP numbers, we have penciled in a 2022 growth rate at 6.5 percent up from 2021’s 5.8 percent. We are not changing our view for now as greater downside risks have emerged since then, e.g. higher inflation, potential slowdown in external demand, which could balance out the stronger growth rate seen in Q1,” it added.
The latest estimate from MUFG touched the lower end of the government’s 2022 GDP growth objective of 6.5 to 7.5 percent and was recently cut downward from 7 to 8 percent.
The growth rate of remittances “is likely to return to pre-pandemic averages of 4.1 percent between 2015 [and] 2019,” MUFG added.
This is aided in part by increasing OFW gross income and the continued rise in the number of Filipino workers who are working abroad.
On the other hand, it said that net FDIs, which totaled $2.4 billion in the first quarter, are expected to rise as a result of the political unrest that has subsided since the presidential elections and the appointment of important Cabinet positions.
“In addition, investing in the Philippines has become more attractive in the long term following former president [Rodrigo] Duterte’s amendment to the Foreign Investment Act which allows 100-percent foreign ownership of MSMEs (micro, small and medium enterprises) with less stringent requirements than before,” the bank added.