THE Asian Development Bank (ADB) recently published the July 2022 edition of its Asian Development Outlook (ADO), and the news should be encouraging for the Philippines. The latest ADO, which was a supplement to the one published in April, judges the Philippines to be a potential bright spot in Asia, where the economic outlook is otherwise less positive than it was a few months ago.
In the latest update, ADB forecasts 2022 economic growth for developing Asia — which includes most of the countries on the continent — to reach 4.6 percent this year and 5.2 percent in 2023, which are lower estimates than the 5.2 percent and 5.3 percent forecasts, respectively, in the April ADO. For Southeast Asia, the forecast for 2022 has been raised slightly from 4.9 percent in April to 5 percent.
For the Philippines, however, the ADB sees significant improvement on the horizon. The bank raised its growth forecast for the Philippines to 6.5 percent for 2022 from 6 percent previously, and kept 2023's forecast unchanged at 6.3 percent.
delivered to your inbox
The ADB attributed the outlook to "a stronger-than-expected Q1 performance, underpinned by rebounds in investment and household consumption. Wider Covid-19 vaccination coverage and relatively mild health impacts from the Omicron variant allowed the economy to reopen further. Mobility data across several activities, including work and recreation, are now back to pre-pandemic levels. Large public infrastructure projects are under way, and private sector indicators, such as the PMI (Purchasing Managers' Index), industrial production and imports, continue to expand."
The ADO does note that there are downside risks, mainly from a possible slowdown in major economies — something we have already seen with China's near-flat 0.2 percent GDP growth in the second quarter — and continuing high commodity prices due to Russia's ongoing war against Ukraine. Inflation is also expected to remain high, although compared with some other countries, not excessively so, with the forecast for 2022 being raised to 4.9 percent from 4.2 percent, and for 2023 raised from 3.5 percent to 4.2 percent.
One significant omission from the July ADO was any mention whatsoever of the change in administration, which implies that ADB's experts do not consider a new government taking the helm in the Philippines to be of economic significance, for better or worse. One reading of that, particularly taking into account the specific factors noted by ADB as contributing to the Philippines' growth outlook, might be that the government does not necessarily need to be proactive in facilitating economic growth, and should simply continue what has already been done to maintain course.
We think that would be a risky assumption, and fortunately, the new administration does not appear to be resting on any laurels, if the extensive laundry list of measures given by President Ferdinand Marcos Jr. in his first State of the Nation Address are any indication. After all, the ADO does qualify its forecast by pointing out there are ongoing risks to growth, although the point is not over-emphasized. That suggests that the risks need to be actively monitored and countered, which include managing inflation, minimizing the negative impact of high commodity prices where possible, and developing safeguards — meaning strengthening the domestic market — against volatility in the advanced economies that the Philippines relies on for export sales, foreign investment and remittances.
Just how the Marcos administration intends to do all that is something we will be discussing in tomorrow's Midyear Economic Forum, where we will be joined by Finance Secretary Benjamin Diokno, Bangko Sentral ng Pilipinas Governor Felipe Medalla, Secretary Arsenio Balisacan of the National Economic and Development Authority, and for the private sector outlook, Bank of the Philippine Islands President and CEO Jose Teodoro Limcaoco. We look forward to hearing how the government intends to live up to the rosy forecast for economic growth, while addressing the key issues that are causing persistent concerns. We are certain that the discussion will be enlightening, and we hope all of you will tune in.