MANILA – The Philippine economy is foreseen to grow by at least 4.5 percent this year and 5.5 percent in 2022, according to an Asian Development Bank report released Wednesday.
Public spending on infrastructure and social assistance, better pandemic response, substantial progress in vaccination rollout and a steady recovery in global economy will boost growth this year and the next, according to the Asian Development Outlook 2021.
Household spending, exports and remittances are also expected to grow this year, ADB Philippines Country Director Kelly Bird told reporters in a virtual briefing.
"This does tell us the economy is on recovery…We’re confident that growth will be 4.5 percent or higher," Bird said.
The Manila-based lender, however, noted that the COVID-19 pandemic “can pose risks to growth prospects" such as the emergence of new variants, global vaccine supply shortage as well as extended local quarantines.
The country’s gross domestic product (GDP) contracted by -9.6 percent in 2020, its worst since the end of the World War 2, after imposing one of the world’s strictest and longest lockdowns.
“Our 4.5 percent growth forecast is at the lower end of economists’ estimates, so there are upsides to this projection,” Bird said.
“Priority should be given to addressing the scarring effects of the pandemic on private sector employment. Programs supporting workers and firms impacted by labor market adjustments and reforms to boost productivity growth and investment will help counter the negative effects of the pandemic on employment over the medium term," he added.
Addressing employment impact and boosting productivity and investments could offset the negative effect, the ADB said in a statement.
Unemployment remains elevated, average work hours reduced and the informal sectors' earnings are compressed, Bird said.
The ADB said the country’s fiscal program and “accommodative monetary policy” would push the economy’s “firm recovery path” in the second half of 2021.
Its wage subsidy program initiated last year was also "very well designed," Bird said.
The Bangko Sentral ng Pilipinas earlier reduced the reserve requirement for banks and has kept key policy rates at its lowest level of 2 percent, injecting trillions in the economy and allowing banks to provide consumers and businesses easier access to capital.
The recent enhanced community quarantine imposed late March, which was lowered to modified ECQ until end of April, won't have the same impact on employment compared to last year since transport and businesses were allowed to operate, Socioeconomic Planning Secretary Karl Chua earlier said.
In line with BSP’s inflation forecast, the ADB said the consumer price index could settle at 4.1 percent in 2021 due to supply side factors caused by the African Swine Fever. The forecast is above the government target of 2 to 4 percent. Inflation is seen to ease to 3.5 percent in 2022, it added.
Chua earlier said the Philippine economy has time to “catch up” on growth of up to 7.5 percent this year despite the recent lockdowns imposed as COVID-19 cases surged.
The total number of COVID-19 cases in the Philippines on Tuesday breached the 1 million mark.