Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday the country is on its way to “full recovery” despite the lingering COVID-19 pandemic and the prolonged Russia-Ukraine conflict in Eastern Europe.
Diokno said during the launch of the World Bank’s Philippines Economic Update June 2022 Report the economy grew 5.7 percent last year and sustained its robust momentum with an 8.3-percent expansion in the first quarter of 2022 after the pandemic-driven recession in 2020.
“We expect the economy to grow much faster in the second quarter, making the growth target for this year of 7 percent to 8 percent doable,” Diokno said.
Diokno said the country’s strengths supporting full recovery include rising employment, surging foreign direct investments, a vibrant manufacturing sector, improving business and consumer outlook and a rebound in domestic economic activity.
He said the employment rate was close to its pre-pandemic level. From a peak of 17.6 percent in April 2020 at the early onslaught of the pandemic, the unemployment rate fell to 5.8 percent in March this year.
Foreign direct investments reached an all-time high last year, growing by 54.2 percent. In the first two months, FDIs went up by 8.0 percent to $1.7 billion.
Manufacturing strongly rebounded, with the purchasing managers’ index at 54.1 in May. This represents nine months of expansion in factory activity.
Diokno said the strong rebound in domestic economic activity and labor market conditions in the first quarter provided scope for the BSP to start rolling back its pandemic-induced interventions.
The BSP reduced the provisional advances to the national government from P540 billion in 2020 and 2021 to P300 billion in January 2022. The national government fully settled its loans on May 20, 2022 ahead of the June 11, 2022 schedule.
“One thing is sure: economies with strong fundamentals tend to handle crises better. In the case of the Philippines, it entered the pandemic with strong macroeconomic fundamentals. Its healthy external accounts and hefty gross international reserves served as a buffer during the pandemic,” Diokno said.
He said the government’s fiscal space allowed it to finance its huge COVID-19 response without incurring unmanageable public sector debts. “Given all these positive developments, we are optimistic that the Philippine economy will do better this year,” he said.
The World Bank said the Philippine economy might grow this year by 5.7 percent and 5.6 percent in the next two years, but warned that domestic and external headwinds could negatively impact these growth projections.
World Bank senior economist Kevin Chua said in an online briefing that the “growth outlook for the Philippines remains positive but subject to downside risks.”
Chua mentioned the upward trajectory of inflation, the ongoing war between Russia and Ukraine, the monetary policy normalization in the US, slowdown in China and the lingering risks posed by the COVID-19 pandemic.