Economy · July 7, 2022

AMRO raises Philippine GDP growth forecasts

On Tuesday, April 12, 2022, Asean + 3 Macroeconomic Research Office chief economist Hoe Ee Khor talks about the Asean + 3 Regional Economic Outlook. TMT SCREENGRAB

Despite the ongoing Russia-Ukraine conflict and tighter global financial situation, Asean + 3’s Office of Macroeconomic Research (AMRO) has increased its 2022 growth forecast for the Philippine economy.

However, it reduced its growth projection for the Association of Southeast Asian Nations plus three (Asean + 3).

AMRO now sees a 6.9 percent expansion for the Philippine economy – as measured by gross domestic product (GDP) – this year, higher than its 6.5 percent projection from last April. The projection for 2023, however, was kept at 6.5%.

“The engine of this growth is fundamentally the openness of the economy,” AMRO chief economist Hoe Ee Khor said in a virtual briefing on Tuesday.

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He said growth will also be driven by domestic consumption and investments, such as infrastructure or projects under the Build, Build, Build program.

Khor said the domestic economy should “do relatively well in terms of growth” this year amid 2019 coronavirus (Covid-19) infections due in part to the continued push to vaccinate.

He said that because “the Philippines is fundamentally a services economy and the business process outsourcing (BPO) sector is doing very well,” AMRO expects the sector “to continue to do well and even expand.”

As the Philippines is a service-oriented economy and has reopened due to declining Covid-19 infections, Khor said it is “less affected by external demand even with the US recession.”

“I think the fallout on the Philippine economy would not be as high as on other economies,” he said.

For Asean + 3 GDP, AMRO expects this year to be around 4.3% from the previous 4.7%, while the forecasts for 2023 have been increased to 4.9% from 4.6%.

In terms of inflation and its impact on Bangkok Sentral ng Pilipinas (BSP) monetary policy, Khor said the central bank has a chance to “really hike” its key rates as economic growth is expected to continue its recovery. and will stay strong.

“We worry about inflation, but because it’s a supply shock, traditionally the advice would be to look through the shock and try to support the economy,” he said.

He expects the BSP to raise its key rates “to a neutral level, which is likely around 4 percent.”

“But even as rates are rising, monetary policy conditions remain accommodative. So, it won’t be a drag on growth because growth is essentially self-sustaining,” he said.