Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday he expects the second-quarter gross domestic product growth to be faster than the 8.3-percent expansion in the first quarter, as macroeconomic fundamentals remain strong despite the lingering COVID-19 pandemic and the war in Eastern Europe.
Diokno participated in the ADB Institute’s webinar on Friday where he tackled issues on macroeconomy, financial technology, and sustainable recovery amid the emergence of new uncertainties.
“We expect GDP to grow much faster in the second quarter, making the 7 percent to 9 percent GDP target this year doable,” Diokno said.
Diokno said his optimism stemmed from the fact that despite the surge of new COVID-19 cases early this year, the economy still managed to expand by 8.3 percent in the first quarter, a reversal of the 3.8-percent contraction a year ago.
“[So] the second quarter [GDP will be] much better than Q1 because we did not have a surge [during the period which] we experienced in January 2022,” Diokno said.
He did not provide specific GDP growth projection for the second quarter.
Diokno said the country was well into its recovery process from the pandemic, which caused a 9.6-percent GDP contraction in 2020. In 2021, the economy rebounded by 5.7 percent.
He cited the country’s solid external position, strong banking system, manageable inflation environment, stable currency, investment-grade ratings from global credit rating agencies, declining unemployment rate and sustained inflows of overseas Filipino remittances as the country’s strengths.
Diokno said he also expects policy continuity under the incoming administration, especially the game-changing reforms instituted by the Duterte administration such as the CREATE Law, “Build, Build, Build” infrastructure program, Rice Tarrification Law, and Retail Trade Liberalization law.
He said the strong 8.3-percent GDP expansion in the first quarter and the rising inflation rate were the reasons the Monetary Board decided to raise for the first time in 18 months the policy interest rate by 25 basis points to 2.25 percent on Thursday.
Diokno said any monetary policy decisions going forward would continue to be data-driven, such as economic growth and inflation.
He earlier said average inflation would likely breach the upper end of the 2 percent to 4 percent target range in 2022 at 4.6 percent, while the forecast for 2023 edged closer to the upper end of the target band at 3.9 percent.
Diokno said the balance of risks to the inflation outlook was leaning toward the upside for both 2022 and 2023, with upside pressures emanating from the potential impact of higher oil prices, including on transport fares and the continued shortage in domestic pork and fish supply.
Meanwhile, downside risks were linked mainly to the potential impact of a weaker-than-expected global economic recovery amid the lingering threat of COVID-19 infections, heightened geopolitical tensions, and a tightening of global financial conditions.
He said the Monetary Board observed the emergence of second-round effects, including the higher-than-expected adjustment in minimum wages in some regions. Inflation expectations also rose, highlighting the risk posed by sustained pressures on future wage and price outcomes.