Economic managers are unfazed by the slower growth of the country saying this is still within their target and that the country is poised to reach its goal for the year.
Bangko Sentral ng Pilipinas Governor Felipe Medalla said while the second quarter growth is only at 7.4 percent, this is still within their forecast range but he did not comment on how this data would affect the upcoming monetary policy decisions.
Finance Secretary Benjamin Diokno 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,” Diokno said.
But private economists are not optimistic since the second quarter GDP data points to a growth target of 6.5 to 7.5 percent.
“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,” said a senior bank economist.
“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.
Another bank economist said they expect growth to slow down in the second semester as inflation is likely to blunt momentum. It 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,” the economist 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.