The inter-agency Development Budget Coordinating Committee on Tuesday upgraded the 2021 gross domestic product growth target to a range of 5 percent to 5.5 percent from the previous estimate of 4 percent to 5 percent, on improved COVID-19 vaccination rollout that lifted consumer and business confidence in the country.
The DBCC is composed of the heads of the Department of Finance, National Economic and Development Authority and the Department of Budget and Management.
“Despite the imposition of stringent quarantines to contain the spread of the threat of the Delta variant, the Philippine economy grew by 7.1 percent in the third quarter of 2021. As we continuously relax restrictions and increase mobility, economic performance is expected to accelerate further in the last quarter of the year,” the economic managers said in a joint statement.
“Hence, the growth assumption for 2021 was adjusted upwards to 5 to 5.5 percent while growth targets for the medium term were retained at 7 to 9 percent for 2022 and 6 to 7 percent by 2023 and 2024,” the DBCC said.
They said with the strong economic performance in 2021, they are optimistic that the GDP would return to pre-pandemic levels by 2022. For 2022 to 2024, the projections for inflation, foreign trade and foreign exchange rate were maintained, given the recent economic developments.
Meanwhile, the Asian Development Bank said Tuesday it revised upward its 2021 growth forecast for the Philippines to 5.1 percent from a previous estimate of 4.5 percent, on faster COVID-19 vaccination program and a sharp drop in new infections.
It said in the supplement to the Asian Development Outlook 2021 report the Philippine economy would also likely grow by 6.0 percent in 2022, up from the previous forecast of 5.5 percent.
The DBCC also updated the assumption for the price of Dubai crude oil to a range of $60 to $80 per barrel for 2022 to 2024 on expected stronger demand for oil as the global economy gradually rebounds in the medium term.
“Revenue projection for 2021 is expected to exceed the target and reach P3.027 trillion due to increased economic activity and improved services of our revenue agencies arising from their digitalization projects,” the DBCC said.
The strong revenue collection performance is seen to continuously improve with revenues returning to pre-pandemic levels at P3.304 trillion in 2022, P3.624 trillion in 2023 and P4.049 trillion in 2024.
Full-year disbursements for the year are seen to reach P4.633 trillion, or 9.6 percent higher from a year ago, on accelerated spending performance seen in infrastructure and other capital outlays, personnel services, transfers to local government units and equity and interest payments. For 2022, total disbursement program was maintained at P4.955 trillion.
“While the threat of new COVID-19 variants may persist in the short term, we are now in a much stronger position to manage possible spikes in cases and safely reopen the economy to alert level 1 in January 2022,” they said.
The economy grew by 4.9 percent in the first three quarters, near the upper end of the previous target range of 4 percent to 5 percent. Last year, the economy contracted 9.6 percent.
“The Philippine economy has shown impressive resilience,” ADB Philippines country director Kelly Bird said.
“Growth momentum has clearly picked up on the back of the government’s vigorous drive to vaccinate Filipinos against the COVID-19 virus. Public spending on infrastructure and continued vaccination of the population will help the country further accelerate its recovery in 2022,” Bird said.
The inflation outlook for 2021 and 2022 was also increased to 4.4 percent and 3.7 percent, respectively, on rising fuel prices, from ADB’s September forecast of 4.1 percent in 2021 and 3.5 percent for 2022.
The bank said vaccination allowed the economy to slowly reopen, boosting consumer and business confidence. More than 57 million Filipinos, or nearly 65 percent of the target for vaccination, received at least one COVID-19 vaccine dose as of Dec. 8, 2021.
The World Health Organization-supported COVID-19 Vaccines Global Access facility also donated supply for the country’s nationwide vaccination program.
ADB said it assisted the government in procuring COVID-19 vaccines and provided $425 million in total financing through the Health System Enhancement to Address and Limit COVID-19 under the Asia Pacific Vaccine Access Facility and HEAL2 programs.
These loans helped fund nearly half of the country’s vaccine supply purchases for 2021. On Dec. 13, ADB approved $250 million in additional financing under HEAL 2 to help the government procure more vaccines for minors and booster shots for adults.
Public spending on major infrastructure projects will support the country’s economic growth, the bank said. ADB said it was supporting the government’s “Build, Build, Build” infrastructure development program, which seeks to boost investments on roads, bridges, and railways to fuel faster growth, especially in areas outside the capital Metro Manila.
ADB’s investments in the country’s flagship projects include the Malolos Clark Railway Project, EDSA Greenways Project and the Angat Water Transmission Improvement Project. The bank is preparing a $175-million loan to assist the government in building climate- and disaster-resilient bridges to improve road traffic flow in Metro Manila.
Meanwhile, the ADB trimmed its 2021 and 2022 growth forecasts for developing Asia. Despite a sharp drop in infections and increased vaccination across the region stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia, the global surge in COVID-19 cases suggested “the pandemic will take time to play out”, it said.
The lender forecast growth of 7.0 percent in 2021 — compared with its previous prediction in September of 7.1 percent — and 5.3 percent in 2022, down from its earlier forecast of 5.4 percent.
While the region was expected to sustain a “strong rebound” and keep inflation at manageable levels, the emergence of Omicron had brought “additional uncertainty”, the ADB said.
“Recent developments in Europe show that extensive virus outbreaks can occur even in highly vaccinated countries and force governments to retighten mobility restrictions,” it said.
“As it [Omicron] appears to be significantly more transmissible than earlier variants, its economic impact could be substantial.”
Vaccination rates have increased across developing Asia in recent months, with nearly half of the population fully protected against Covid-19 at the end of November, compared with less than a third at the end of August, the lender said.
That has enabled many economies to start reopening, boosting manufacturing activity and trade in the region.
But coverage remained uneven — 20 economies still have less than 40 percent of their populations fully vaccinated, “leaving them susceptible to renewed outbreaks”.
And the region still lagged the nearly 60 percent coverage in the United States and more than 67 percent in the European Union.
“New pandemic waves could reverse the current reopening trend in many economies owing to still-insufficient vaccination coverage,” the ADB warned.
While a resurgence in COVID-19 infections was the main threat, the ADB also flagged a prolonged downturn in China’s housing market, rising inflation and global supply disruptions as risks to the outlook.
China—where several real estate companies have been plunged into financial crisis following a debt crackdown by Beijing—was expected to grow 8.0 percent this year and 5.3 percent in 2022.
The ADB said the growth rates were slightly slower than its previous predictions.
