2022 PH growth projections slashed

FOLLOWING the slower-than-expected performance in the second quarter, local lender Bank of the Philippine Islands (BPI) and global research company Capital Economics have revised downward their economic growth outlooks for the country this year.

“Given the latest print, we have revised our full-year GDP (gross domestic product) forecast from 6.7 to 6.3 percent,” BPI stressed in a report released after the announcement of the domestic output uptick of 7.4 percent in April-June 2022.

Given the waning base effects and the impact of inflation, it said a reduced growth rate is expected for the second half of the year, adding that pent-up demand may still exist but is likely just as strong as before.

In July, the headline inflation rate in the Philippines hit a new three-year high of 6.4 percent. The bank said, historically, inflation at this level typically results in a slower growth in household consumption.

It advised caution, saying, “It may eventually spill over to other components of the economy like investment spending if inflation stays at elevated levels for a prolonged period.”

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BPI noted that the price of oil has lately decreased, and that a further slide might support growth in the second half of the year.

“A sharp slowdown can be avoided, however, if the return of students to face-to-face classes and higher uptake in booster shots are seen in the coming months to boost the performance in the second half. Without these, the country’s recovery may lose its momentum,” it emphasized.

For its part, Capital Economics said the economy will continue to grow slowly in the second half of 2022 due to high commodity prices, rising interest rates and decreasing global demand.

It said in quarter-on-quarter terms, the economy contracted by 0.1 percent in the three months ending in June, compared with growth of 1.5 percent in January-March, and has yet to regain its pre-pandemic size and is currently 0.3 percent smaller than it was on the eve of the Covid-19 crisis.

The firm also said while global growth continues to slow due to rising interest rates and greater inflation, the slower trend of exports, which fell from 10.4 percent year on year in the first quarter to only 4.3 percent in the second, is likely to continue over the coming quarters.

“A shift in global consumption patterns from goods back to services will also weigh on the sector,” it underscored.

Capital Economics also projects that consumer-facing industries will also have difficulties in the upcoming months as these factors continue to restrain expenditure.

It also pointed out that investment, which is currently 7.6 percent below its pre-crisis level, is expected to continue sluggish as prospects are hampered by rising interest rates and high commodity costs.

“Overall… we are cutting our forecast for this year from 8.0 percent to 6.5 percent,” the firm said.

The forecasts compare to the government’s target range of 6.5- to 7.5-percent expansion for 2022, but stronger than last year’s actual growth of 5.7 percent.