ADB: Philippines to see economic recovery despite pandemic, Ukraine fallout

The Philippines’ economy will keep recovering strongly in 2022 as loosened pandemic restrictions drive local consumption and despite concerns about “geopolitical tensions,” the Manila-based Asian Development Bank said Wednesday.

Growth is expected at 6 percent this year, one of the highest rates in Southeast Asia, and is forecast to rise by another 6.3 percent next year, according to the bank’s Asian Development Outlook, its flagship economic publication.

“Nearly all indicators point to higher growth for the Philippines this year and in 2023, barring the impact of external factors from geopolitical tensions that may dampen growth globally, including in the country’s key export markets Europe and the United States,” said Kelly Bird, ADB’s country director for the Philippines.

Despite the positive outlook, inflation is likely to rise to 4.2 percent in 2022 as tensions push oil prices higher, the ADB said, referring to the Russian invasion of Ukraine.

The Philippine economy grew by 5.6 percent in 2021 after a COVID-induced recession saw it tanking by 9.6 percent the previous year.

The forecast comes a little more than a month after the Philippines reopened the economy amid the easing of pandemic restrictions, allowing tourists to revive the travel sector while ensuring that more Filipinos are vaccinated against the disease.

Metro Manila and areas on the main island of Luzon shifted to the lowest level of COVID-19 restrictions in March. Some schools have reopened, while parks, zoos, and malls have begun operating again as daily infections have dropped below 1,000, Filipino officials said.

ADB said this would help overall projections because the capital region, home to about 14 million people, accounts for about 70 percent of the total gross domestic product.

The opening of the borders would likely boost “tourism and employment in the services sector, which accounts for 60 percent” of the economy, the ADB report said.

“Policies to build the resilience of micro, small, and medium-sized enterprises, which play a vital role in the country’s economic recovery, should be strengthened to support the sector’s digital transformation, business innovation and skills development,” Bird said in a statement.

On Wednesday, the Philippine health department recorded 265 new COVID-19 cases, bringing the total number since the pandemic began to more than 3.6 million. More than 66.2 million of the country’s 110 million people have been fully vaccinated, while 71 million others have received their first dose.

Positive forecast

Meanwhile, Asia’s developing economies are forecast to expand by 5.2 percent this year before edging up to 5.3 in 2023 on the back of strong domestic demand and exports recovery, ADB said. Last year saw growth at 6.9 percent as the region began recovering from COVID-19.

In the forecast, East Asia, South Asia and Southeast Asia are expected to return to pre-pandemic growth rates.

However, the development bank said uncertainties including fears of high-interest rates could have a negative effect on regional economies.

“The Russian invasion of Ukraine has severely disrupted the outlook for developing Asia, which is still contending with COVID-19,” the ADB said.

ADB chief economist Albert Park said the war in Ukraine remains the biggest concern because it already has impacted economies in the region through an uptick in oil prices.

“Economies in developing Asia are starting to find their footing as they slowly emerge from the worst of the COVID-19 pandemic,” Park said.

“However, geopolitical uncertainty and new COVID-19 outbreaks and virus variants could derail this momentum. Governments in the region will need to remain vigilant and prepared to take steps to counter these risks.”

China, the world’s second-largest economy, is forecast to grow 5 percent this year and 4.8 percent next year, weaker than its 8.1 percent expansion in 2021, while India is expected to see 7.5 percent growth this year and 8 percent in 2023.

In Southeast Asia, Vietnam is expected to see growth rates of 6.5 percent, the most robust performance, followed by the Philippines and Malaysia – both at 6 percent. Indonesia is expected to grow by 5 percent and Thailand by 3 percent this year.

In South Asia, the Maldives is set to lead the growth rate at 11 percent, followed by India at 7.5 percent and Bangladesh at 6.9 percent.

While regional inflation remains manageable, the ADB Outlook said it would likely rise to 3.7 percent this year before dropping back to 3.1 percent in 2023.