A NEW report from the Asian Development Bank (ADB) released Wednesday, April 28, 2021, has forecasted the Philippine economy to grow 4.5 percent in 2021 and 5.5 percent in 2022.
The ADB’s early projection in December was at 6.5 percent, which falls below the 6.5 percent to 7.5 percent target band set by the government’s economic managers.
The bank’s economic publication, Asian Development Outlook 2021, noted that substantial progress in the country’s vaccination rollout will help restore consumer and business confidence, though uncertainties over how the pandemic will unfold globally and domestically can pose risks to growth prospects.
“Our 4.5 percent growth forecast is at the lower end of economists’ estimates, so there are upsides to this projection,” said ADB Philippines country director Kelly Bird. “Priority should be given to addressing the scarring effects of the pandemic on private sector employment. Programs supporting workers and firms impacted by labor market adjustments and reforms to boost productivity growth and investment will help counter the negative effects of the pandemic on employment over the medium term.”
The government’s expansionary fiscal program and accommodative monetary policy will put the economy on a firm recovery path by the second half of 2021.
The report said government plans to strengthen labor market programs and assist in the recovery of sectors badly affected by the pandemic, including agriculture and tourism, will further support a pickup in the economy.
It noted, however, that uncertainties over the course of the pandemic and the emergence of new coronavirus variants across the globe remain a big challenge.
“The Philippines’ Covid-19 vaccine rollout may suffer from global supply shortages in the short term, and local community quarantines could be extended to curb the spread of Covid-19,” the report said.
The ADB predicts inflation to rise to 4.1 percent in 2021, up from 2.6 percent in 2020, due to rising global commodity prices and other supply-side factors. For instance, the African swine fever has resulted in disruptions to the pork supply in the Philippines. Inflation is expected to ease to 3.5 percent in 2022 as the government takes measures to address supply-side pressures.
On the other hand, Asian economies will grow at a solid 7.3 percent pace this year after contracting slightly in 2020 due to the pandemic.
But the regional lender said the forecast is in doubt as outbreaks of coronavirus flare in several countries, including Thailand, India and the Philippines. These setbacks threaten just as growth has been gaining momentum, said the ADB’s chief economist Yasuyuki Sawada.
“Economies in the region are on diverging paths,” he said. “Their trajectories are shaped by the extent of domestic outbreaks, the pace of their vaccine rollouts, and how much they are benefiting from the global recovery.”
The ADB expects inflation in the region to fall to 2.3 percent this year from 2.8 percent in 2020, when disruptions from the pandemic pushed food prices sharply higher in some places. The inflation rate for developing Asia is forecast to rise to 2.7 percent in 2022. (KOC/With AP)