The Asian Development Bank (ADB) expects the Philippine economy to grow at a much faster pace this year despite accelerating consumer prices.

In the Asian Development Outlook 2022 Supplement report released on Thursday, July 21, the Manila-based multilateral institution raised its gross domestic product (GDP) forecast for the country from 6.0 percent in April to 6.5 percent.

ADB said the better than expected growth was due to the relaxation of Covid-19 mobility restrictions, along with the expansion of the government’s inoculation program, and a rebound in investment and household consumption.

The latest GDP projection now settles at the lower end of the Marcos administration’s target band of 6.5 percent to 7.5 percent.

“The Philippine economy’s growth momentum has accelerated close to its ideal growth path,” Kelly Bird, ADB Philippines country director said in a statement.

“Strong domestic demand supported by a pick-up in employment and remittance inflows, private investment expansion, and large public infrastructure projects will underpin the country’s recovery from the economic impact of the pandemic,” he added.

Wider Covid-19 vaccination coverage, with adolescents among those getting inoculated, and relatively mild health impacts from the Omicron variant have allowed the government to relax restrictions starting in the first quarter of the year.

“This in turn spurred a resumption in expanded operations for most private businesses, with the unemployment rate falling to near pre-pandemic levels. The unemployment rate was at 6.0 percent in May 2022, down from 7.7 percent a year earlier,” ADB said.

For 2023, ADB maintained its growth outlook at 6.3 percent, below the government’s 6.5 percent to 8.0 percent target range for next year until 2028.

But ADB flagged some downside risks to growth, particularly in the second semester of 2022.

These include sharper-than-expected slowdowns in major industrial economies, possible sustained elevated global commodity prices, and tighter financial conditions.

ADB already lowered its 2022 economic growth forecast for developing Asia and the Pacific to 4.6 percent due to slower expansion in China, more aggressive monetary tightening in advanced economies, and fallout from the continued Russian invasion of Ukraine.

Last week, the Bangko Sentral ng Pilipinas made a surprise off-cycle move, raising its benchmark interest rates by 75 basis points to 3.25 percent effective July 14.

Finance Secretary Benjamin E. Diokno shrugged off the impact of higher interest rates, saying “the economy continues to be robust to absorb the recent Monetary Policy rate increase given the favorable expansion of economic activity early this year.”

Meanwhile, the sustained acceleration of consumer prices prompted the ADB to raise its inflation forecast for the Philippines. From 4.2 percent, ADB increased its inflation projection to 4.9 percent for 2022.

The bank also expects inflation to quicken to 4.3 percent next year, up from the 3.5 percent outlook last April. ADB’s inflation forecast is above the government’s goal of 2.0 percent to 4.0 percent.