The growth of the country’s Gross Domestic Product (GDP) slowed down to 7.4 percent in the second quarter of 2022 compared to 8.2 percent in the first quarter. Using constant 2018 prices, the economy was valued at ₱4.99 trillion, better than the pre-pandemic GDP of ₱4.985 trillion in the second quarter of 2019.
Socioeconomic Planning Secretary Arsenio Balisacan attributed the slowdown to external factors: “I think the global headwinds, particularly inflation — (and) particularly those coming from energy, fuel and food — contributed to the slowdown. As expected this would continue in the second half. We would likely face some challenges sustaining the growth.”
Inflation accelerated to a near four-year high of 6.1 percent in June, raising average inflation to 5.5 percent for the second quarter, still within the government target.
The second-quarter GDP growth was the slowest since the third quarter of 2021 when the economy posted a seven percent growth. Recall that the economy turned around with a 12.1 percent growth in the second quarter of 2021 following the steep recession triggered by the coronavirus pandemic outbreak in early 2020.
As the reopening of the economy proceeds at a faster pace, more income-earning opportunities will be generated — but the resulting increase in purchasing power may be eroded by high inflation caused by continuing increases in food and fuel costs.
Bangko Sentral ng Pilipinas Governor Felipe Medalla has assured that: “In order to manage the spillover effects of such external developments, the BSP is prepared to utilize the full force of available measures in order to address the potential risks to domestic inflation expectations arising from an overshooting or excessive depreciation of the Philippine peso.”
He was referring specifically to the need to rein in inflationary risks brought on by a recent 75-point hike in the US Federal Reserve rates, that is seen to negatively impact the Philippine peso.
Maintaining the stability of the peso-dollar rate is an important policy concern. Dollar remittances from overseas Filipino workers support millions of families, many of who are still reeling from the harsh economic difficulties brought on by the Covid-19 pandemic.
Filipino families are also presently gearing up for the expected full-scale return to face-to-face classes up to the college level. This is a time when breadwinners are gathering cash and other resources to pay tuition and school fees, and provide for other basic back-to-school needs of their children.
The new administration’s economic team is intensely focused on achieving stability and growth by crafting an optimal blend of fiscal and monetary policies. They are determined to ensure that the country would ride through the risks brought on by turbulence and uncertainty both here and abroad.
From a macroeconomic perspective, Secretary Balisacan notes that even at the slower rate of 7.4 percent, the country’s second quarter GDP growth was just a shade behind Vietnam’s 7.7 percent. The Philippines ranks second highest in terms of economic growth rates among major emerging economies in the region. If this trend is sustained, the government’s goal to attain an annual GDP growth ranging from 6.5 to 7.5 percent is well within reach.