MANILA - The Philippine economy could expand 7.2 percent in 2022 before slowing down next year, driven by the pent-up demand and the strong performance in the first 3 quarters, according to the Philippines Economic Update (PEU) released by the World Bank on Tuesday.
The economy's strong performance in the first 3 quarters was attributed to the easing mobility restrictions that fueled businesses, and government spending.
Meanwhile, the slower growth in 2023 is attributed to reduced consumer demand, high inflation and higher interest rates that are seen to temper household spending and investments.
Inflation hit 8 percent in November, the highest since November 2008. The Bangko Sentral ng Pilipinas has raised the benchmark interest rate by a total of 300 basis points to 5 percent to cool down inflation.
“High inflation tends to inflict the greatest harm on low-income households where inflation often outpaces wage growth, which these households rely on,” said Ralph van Doorn, World Bank Senior Economist.
“Besides managing the interest rate, addressing inflation entails employing various measures including freer trade, lower tariffs and non-tariff barriers to help augment domestic supplies as needed and support to agriculture production through extension services, seeds, fertilizers," Doorn added.
It is also crucial to maintain investments in health and education to reduce the scarring impact of the pandemic on the most vulnerable, World Bank Country Director for Brunei, Malaysia, Philippines, and Thailand Ndiamé Diop said.
“Shocks from the COVID-19 pandemic have worsened child malnutrition and stunting and hampered student learning, especially among the poor and most vulnerable families,” said Diop.
“If unmitigated, these shocks can have persistent impacts on people’s well-being and damage their future productivity, earnings, and capacities for innovation. For this reason, sustained investments in agriculture, nutrition and education are imperative despite pressure for fiscal consolidation.”
The World Bank said strengthening agriculture would boost food security. The sector's prospects remain "poor" due to underinvestment and vulnerability to weather-related shocks.
The Development Budget Coordination Committee on Monday affirmed its 6.5 to 7.5 percent target for 2022 but announced a decelerated 6 to 7 percent outlook for 2023.
It also raised its inflation forecast for the year to 5.8 percent from the 4.5 to 5.5 percent range.