AMRO raises PH 2022 growth forecast to 6.9%

The ASEAN+3 Macroeconomic Research Office (AMRO) has revised higher its growth forecast for the Philippines this year to 6.9 percent from 6.5 percent two months ago due to rising domestic demand and strong fiscal support.

“We’re very optimistic on the Philippines,” said AMRO Chief Economist, Hoe Ee Khor, in a press chat on Tuesday, July 5.

For 2023 and over the long term, AMRO forecasts 6.5 percent for the country’s gross domestic product (GDP) growth. Pre-pandemic, annual GDP growth was above six percent.

Khor said their 2022 growth estimate is “slightly less optimistic” compared to the government’s seven percent to eight percent target for 2022. “Nevertheless, at 6.9 percent, it is among the highest growth rate in the region,” he added.


AMRO, a regional macroeconomic surveillance organization, noted that the economy is recovering steadily and it is sustained, coming from a 9.6 percent GDP contraction in 2020, then rebounding strongly to a 5.6 percent growth in 2021.

The drivers for current growth projection is the opening of the economy, and the rapid vaccination drives in the past year.

“We expect the Philippines to do relatively well in terms of growth of 6.9 percent this year. For next year, we expect 6.5 percent. (The) 6.5 percent is our projection for long-term growth and the drivers are domestic demand, investments, the Build Build Build program,” said Khor.

He also expects the export sector and the business process outsourcing industry to do well this year. “(Philippines) is less affected by external demand ... the spillover effect on the economy will not be as high as it is for some of the other economies,” said Khor.

On inflation and interest rates, the economist said the Bangko Sentral ng Pilipinas (BSP) is worrying about the rates of price increases but these are mostly supply shocks. “Because it is a supply shock, traditionally (the advise) is look through the shock and try to support the economy,” said Khor.

With a recovering economy, the BSP’s Monetary Board on May 19 and on June 23 have started to raise the benchmark rates by a cumulative 50 basis points (bps), bringing the policy rate to 2.5 percent from two percent flat since November 2020.

Khor thinks the BSP will likely adjust interest rates further until it reaches four percent. “Since the economy is rebounding quite strongly, the central bank has started to raise rates. They have normalized the rate to 2.5 percent and it’s better to raise it to a neutral level which is around four percent,” he said.

“It’s prudent for the central bank to start raising rates now (while economy is recovering) in case there’s another shock and they need to lower rates. (But) we don’t think the increase on the policy rate will have a significant impact on growth this year and next year,” he added.

AMRO economists including Khor earlier concluded its virtual annual consultation with local economic officials, with a preliminary assessment that the Philippines’ economic recovery “is firmly on track” dispute the recurrent waves of Covid-19 infections last year.

The consultation covered the government’s anti-pandemic response since 2020, the vaccination progress and the status of economic recovery including the risks and challenges, as well as policy responses.

For 2022, AMRO said public expenditure will still be the main growth driver with the private sector recovery “gaining momentum with the reopening of the economy, supported by better economic prospects, improving confidence, and favorable external demand.”

AMRO recommends continued “broadly neutral” fiscal policy space for this year which it said is still appropriate “as the private sector recovery is expected to become more self-sustaining going forward.”

On Tuesday, AMRO said that due to the impact of recent Covid-19 outbreaks in China, plus the headwinds from the Ukraine conflict, it has adjusted lower its short-term growth forecast for the ASEAN+3 region.

AMRO now forecasts an ASEAN+3 region growth of 4.3 percent this year versus its previous estimate of 4.7 percent. It also raised its 2022 inflation forecast for the region to 5.2 percent from its January estimate of 2.9 percent.

Meantime, growth is expected to strengthen to 4.9 percent in 2023, while inflation will likely fall to 2.8 percent, it said.

AMRO said that more ASEAN+3 economies consider the pandemic as now an endemic. “The further easing of containment measures and travel restrictions should allow for a fuller resumption of economic activity and help boost domestic demand. As a result, growth, especially in the ASEAN region, is expected to remain robust this year and the next,” it noted on Tuesday.

AMRO’s mandates include not only macroeconomic surveillance, but also supporting the implementation of the Chiang Mai Initiative Multilateralisation and providing technical assistance to its members.