The ASEAN+3 Macroeconomic Research Office (AMRO) expects the Philippine economy will grow at a much slower pace this year after the highly transmissible Omicron variant rattled the services sector’s recovery.
In its ASEAN+3 Regional Economic Outlook released on Tuesday, Jan. 25, the regional macroeconomic surveillance organization slashed the 2022 gross domestic product (GDP) forecast for the Philippines to 6.2 percent from 6.7 percent.
The downward revision was caused by “the spread of the highly transmissible Omicron variant at the beginning of the year necessitated the reimposition of containment measures, including a retightening of border controls.”
AMRO’s latest forecast is also below the Duterte administration’s target range of seven percent to nine percent growth.
Hoe Ee Khor, AMRO chief economist said the services sector, one of the nation’s primary growth drivers, continues to be the weak spot as uncertainty about the full reopening of the economy remains
“If they are able to open up the economy more fully, they will help the services sector to recover much more robustly,” Khor said in a virtual press briefing.
“If they had to close down for any reason because of a new outbreak, more infectious and more severe mutation of the virus, then I think the Philippine be affected more,” he added.
But barring any unforeseen event, Khor is confident that the Philippines, a service oriented economy, is well on track to recovery as consumption gains more traction in 2022.
“Consumption has been very badly affected in the last two years because of the lockdown. We saw that growth collapsed as the consumption collapsed very strongly in 2020,” Khor noted.
"So this year, with the reopening of the economy, we expect services sector and consumption to be the main drivers of the economy,” he added. “The Philippine would benefit much more because of the reopening and service sector being able to recover much more strongly.”
However, AMRO raised its 2021 GDP outlook for the Philippines from 4.3 percent to 4.9 percent.
AMRO noted that the country saw “stronger pick-ups in economic activity” last year.
But despite the projected faster than expected GDP, the revised economic growth projection is still lower than the five percent to 5.5 percent growth target set by the inter-agency Development Budget Coordination Committee.
Meanwhile, AMRO’s inflation forecasts were also adjusted.
In 2021, AMRO estimated that inflation averaged 4.5 percent, faster than 4.3 percent previously.
This year, AMPR expects headline inflation to average 3.3 percent from 3.2 percent.