Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday he expects the full-year economic growth to exceed the target range of 4 percent to 5 percent, with the gross domestic product expanding by about 7 percent in the fourth quarter.
“The revised GDP forecast this year is 4 to 5 percent… It will be likely more than 5 percent for the full year. We already grew by 4.9 percent in the first three quarters,” Diokno said in an online briefing.
Diokno said based on the easing of quarantine restrictions, faster pace of COVID-19 vaccination rollout, increased mobility and more economic activities from October to December, the “fourth quarter [GDP growth] maybe around 7 percent.”
The economy expanded 7.1 percent in the third quarter, a turnaround from the 11.6-percent contraction a year ago that was pulled down by the devastating impact of the COVID-19 pandemic. Industry and services contributed to the expansion, growing by 7.9 percent and 8.2 percent, respectively.
The third-quarter expansion was, however, slower compared to the revised 12-percent growth in the second quarter. This brought the year-to-date average GDP growth to 4.9 percent, near the upper end of the target range.
Diokno said the conditions contributing to supply chain issues might diminish as some economies returned gradually to their pre-pandemic phase.
“Amid a challenging global economic environment, the BSP shall continue to be vigilant in monitoring the potential inflationary risks that may arise from supply shortages while providing the appropriate policy support to help ensure a sustainable path to economic recovery,” he said.
Diokno said the multidimensional disruptions in global supply chains reverberated among both advanced economies and their trading partners, as input linkages in global value chains created mechanisms in the transmission of price and output shocks.
Global supply chain refers to the cross-border organization of activities to produce and distribute goods and services.
Diokno said that in the case of the Philippines, the backward linkages of local industries to global value chains suggested that disrupted cross-border flows of production inputs could temper output capacity in the near term.
Domestic businesses continued to report contracting output and higher input prices as transportation constraints and delays had an effect on suppliers’ delivery performance, according to reports published by the Philippine Institute for Supply Management and IHS Markit.
As a result of these developments, higher global non-oil prices, along with the possibility of prolonged shortages in select food commodities, could pose an upside risk to domestic inflation.
The emergence of the Omicron variant of COVID-19 may further prolong the supply chain disruptions as some governments re-imposed mobility restrictions to curb the spread of infections.
Diokno said as the economy was still in the nascent recovery phase, and the pass-through effect to domestic prices appeared limited as indicated by the path of underlying inflation.