WB lowers PH 2022 GDP outlook

Published April 5, 2022, 12:37 PM

by Chino S. Leyco

The World Bank has slightly downgraded the Philippines’ gross domestic product (GDP) outlook for 2022 from 5.8 percent to 5.7 percent, falling further below the Duterte administration’s target of seven to nine percent due to external risks.

In its East Asia and Pacific Economic Update released Tuesday, April 5, the World Bank said that the Philippines despite the Russian-Ukraine conflict and rising consumer prices globally still has strong domestic demand to help cushion the effects of weak external environment, the World Bank said.

Between 2023 and 2024, the Washington-based institution is also looking at a 5.6 percent GDP rate on average.

In lowering the 2022 outlook, World Bank noted the “significant risks emanate from the external environment,” citing that the “consumption growth could have been higher if not for the Russia-Ukraine war driving inflationary pressure on fuel and food.”

The geopolitical turmoil in Eastern Europe comes on top of the economic distress caused by the prolonged pandemic, the financial tightening in the United States, and the pandemic resurgence amidst zero-Covid policies in China.

“Global commodity and energy prices will intensify inflationary pressure,” the bank said.

However, World Bank said the Philippine consumption-driven economy will draw strength from the domestic environment with declining Covid-19 cases, looser restrictions, and wider reopening.

“The strong domestic condition will help compensate for the weak external environment, reeling from a global growth deceleration, rising inflation, and geopolitical turmoil,” the bank said.

Moreover, public consumption is expected to grow in line with the bigger national budget, while public infrastructure investments will contribute to capital formation growth, World Bank said.

But with the forthcoming elections, World Bank warned that the political transition risks policy discontinuity may undermine market confidence.

Meanwhile, World Bank said the Russia-Ukraine conflict may induce inflation spikes that may slowdown the decline in poverty due to knock-on effect of fuel price increases on food prices that disproportionately hurt the poor and economically vulnerable.

Poverty incidence is estimated at 18.3 percent last year, based on the lower middle-income poverty line of $3.2 a day.

Following current growth projections, poverty incidence is expected to decrease to 16.2 percent this year, and continue to decline through 2024.