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Philippines: Slower Q1 growth seen
Due to January COVID surge
MANILA, Philippines — Economists are looking at a slower gross domestic product (GDP) growth in the first quarter as the surge in COVID cases to record highs in January due to the more contagious Omicron variant prompted the government to reimpose stricter quarantine and lockdown protocols in the National Capital Region (NCR) and nearby provinces.
Security Bank chief economist Robert Dan Roces said the country’s GDP likely expanded by only seven percent in the first quarter, slower than the revised 7.8 percent recorded in the fourth quarter of last year.
After placing NCR and several areas under Alert Level 3, the lockdown was gradually eased until it was downgraded to Alert Level 1 in March.
“The reopening theme is playing out well, and we expect domestic consumption to have remained to be the primary driver of the recovery on the back of looser quarantine curbs that improved overall mobility and the purchasing managers’ index – a good predictor of growth’s direction,” Roces said.
Roces said the downside risks in the quarters ahead remain to be the pandemic as well as elevated inflation.
The Philippines exited the pandemic-induced recession, which stretched through five quarters, with a GDP growth of 5.7 percent in 2021, reversing the 9.5 percent contraction in 2020.
“We do not anticipate a regression toward a negative path for growth, but rather slower than the potential on the back of inflation’s effect on domestic consumption,” Roces said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., also said the GDP grew by seven percent from January to March due to lower denominator effects as it shrank by 3.8 percent in the same quarter last year.
Ricafort said the major economic drivers for the first quarter and for the rest of 2022 include measures to further reopen the economy toward greater normalcy although in a gradual manner, increased government spending especially on infrastructure, and election-related spending.
Ricafort said that Republic Act 11534 or the Corporate Recovery and Incentives for Enterprises (CREATE) Act is the country’s biggest stimulus measure so far for the coming years.
According to Ricafort, the still relatively accommodative monetary policy of the Bangko Sentral ng Pilipinas (BSP), through relatively low interest rates, would continue to help stimulate greater demand for loans and in turn help boost local and foreign investments in the country.
The Yuchengco-led bank sees the economy growing to a range of six to 6.5 percent this year from last year’s 5.7 percent, but with some potential upside surprises toward the seven percent growth range
ANZ Reseacrh economist Krystal Tan said economy likely expanded by 5.8 percent in the first quarter, mainly driven by consumption growth.
“An improved labor market, increased remittances flows and the reopening of international borders since mid-February have been supportive of private consumption demand for both goods and services,” Tan said.
However, Tan said that the strength in private consumption growth may start to fizzle as a sharp rise in inflation erodes households’ purchasing power amid limited fiscal support.
UnionBank chief economist Ruben Carlo Asuncion said the country’s GDP may have grown by 5.5 percent from January to March as the reopening of the economy is seen to be a major driver amid the declining number of infections in previous months.
“We think that the economy shrugged off the potential negative impact of the Omicron-related surge in early January as evidenced by the continuing expansion of PMI. Furthermore, domestic demand has continued to improve and we think this is so because again of the economy’s re-opening,” Asuncion said.
Asuncion said that it is still too early to tell if the government could hit its GDP growth target of seven to nine percent this year.
The Aboitiz-led bank has penned a slightly faster GDP growth of 5.8 percent for this year.
Source: https://www.philstar.com/business/2022/05/09/2179648/slower-q1-growth-seen