The Philippine economy is on its way to recovery from the debilitating impact of the COVID-19 pandemic, based on the latest economic data released by the government, according to economists from First Metro Investment Corp. and University of Asia & the Pacific.
Economists, in the “Market Call” report released Tuesday, cited the better-than-expected gross domestic expansion of 5.6 percent in 2021 and promising figures on employment, manufacturing, government spending, inflation and remittances.
“Fresh economic data released in December and early January 2022 bolster the hope of the Philippine economy on the mend. Fiscal year 2021 GDP was reported at 5.6 percent. This should accelerate by another 1 percentage point at least with the growth momentum in place, reinforced by heavy election spending in the first half of 2022,” they said.
November employment figures provided the biggest boost to this optimism as it added 1.6 million jobs to reach a record employment of 45.5 million, according to the report.
“While a slight correction may occur in December, the excited reopening of businesses and consumer spending seen in malls and restaurants should provide the needed impetus for the economic recovery gaining traction,” they said.
The official release on industrial output again showed a hefty 25.4-percent year-on-year increase in November, a tad faster than in October, they said.
“Besides, IHS Markit’s Manufacturing PMI again showed a further expansion and should lead the sectoral growth rate in the fourth quarter of 2021,” they said. The Purchasing Managers’ Index points to the prevailing direction of economic trends in the manufacturing and service sectors.
Economists said that while national government spending showed only a slight acceleration in November to a 10.4-percent year-on-year growth compared to 9.6 percent in October, “a deeper dive into the data depicted a much better picture.”
“National government disbursements for current and capital outlays [excluding interest payments, allotments to LGUs, subsidies, etc.] actually climbed by 16.2 percent year-on-year as infrastructure spending continued to hum,” they said.
All imports of equipment categories showed positive growth, while capital goods imports soared by 18.8 percent year-on year-in November, representing the eighth consecutive month of increase.
“With this, we expect domestic demand [i.e., sum of consumption, investment, and government spending] to remain in the driver’s seat of the growth vehicle,” they said.
Economists also noted that December inflation eased to 3.6 percent from 4.2 percent in November, marking the first-time headline inflation rate came within the Bangko Sentral ng Pilipinas’ target of 2 percent to 4 percent in a year.
“However, we think that in 2022, despite elevated crude oil prices, inflation will remain within this range and average 3.7 percent for the entire year,” they said.
Robust OFW remittances should continue in December, which helped temporarily buoy the peso, according to the report.
Economists said, however, that the widening trade deficits due to high crude oil prices and stronger economic growth in 2022 should keep the peso on a depreciation mode.
The economy expanded by 5.6 percent in 2021, better than the government’s target range of 5 to 5.5 percent for the year, and a turnaround from the 9.6-percent contraction in 2020
The government expects GDP to grow by 7 to 9 percent in 2022, backed by an accelerated vaccination rollout against COVID-19 that could boost business and consumer confidence.