Economic chiefs stay upbeat amid slow growth

BSP Governor Felipe M. Medalla (Photo from the University of the Philippines Facebook page via CNN Philippines)

TOP economic managers in the country say the slower growth of the Philippines is well-within their expectations, and will still be on its way to reaching the government’s target for the year. 

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla told reporters on Tuesday that the GDP growth rate—announced at 7.4 percent for the second quarter of the year—is within their forecast range. The governor, however, did not comment on how the new data will affect their upcoming monetary policy decisions. 

Department of Finance (DOF) Secretary Benjamin Diokno, meanwhile, said he is “reassuring the public” that “the economy is on a steady path to recovery and expansion” amid the slowdown of the economy from the revised 8.2 percent growth in the first quarter of the year. 

“Our growth figure of 7.4 percent of GDP sits comfortably at the higher end of our target band for the year. This is an impressive achievement, more so with the ongoing challenges of rising inflation worldwide and an uncertain global political economy,” Diokno said. 

The Development Budget Coordination Committee’s (DBCC) has set a GDP growth target of 6.5 percent to 7.5 percent for 2022.

“All three major sectors—agriculture, industry, and services—posted positive growth rates despite the increase in international commodity prices, indicating a rebound in overall economic activity,” the Finance Secretary added. 

Private economists, however, were not as optimistic. 

ING Bank economist Nicholas Mapa said the second quarter GDP data points to full-year growth settling at the lower-end of the government’s 6.5 to 7.5 percent growth target.

“The economy is facing the triple threat of accelerating inflation, rising borrowing costs and a relatively high debt-to-GDP ratio. Faster inflation, which was last reported at 6.4 percent, should cap overall household spending while rising interest rates are likely to deter investment outlays. Meanwhile, elevated levels of debt could act as a handicap and mitigate the ability of the national government to provide stimulus in the near term,” Mapa said. 

“All together, the headwinds facing the Philippine economy could force 2022 GDP growth to settle at 6.5 percent, at the lower-end of the BSP’s aspirational target,” he added. 

In a separate commentary, Bank of the Philippine Islands (BPI) economists also said they expect growth to slow down in the second half of the year as inflation is likely to blunt momentum.

The bank also revised its full-year growth forecast from 6.7 percent to 6.3 percent, indicating that they see growth missing the government’s target for the year.

“Based on historical experience, inflation at this level usually leads to a slower household consumption growth. This may eventually spill over to other components of the economy like investment spending if inflation stays at elevated levels for a prolonged period. However, the price of oil has gone down recently and additional decline may support growth in the second half of 2022,” BPI said. 

“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,” the bank added. 


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