MANILA, PHILIPPINES (22 September 2021) — The Philippines’ economic growth in 2021 and 2022 will be supported by sustained growth in public infrastructure spending, improving consumer confidence, and progress in the national coronavirus disease (COVID-19) vaccination program, according to a report released today by the Asian Development Bank (ADB).
ADB maintained its forecast for the Philippines’ gross domestic product (GDP) growth at 4.5% in 2021 and 5.5% in 2022 in its Asian Development Outlook (ADO) 2021 Update. The report notes signs of a gradual recovery in the country’s economy, with the upturn in domestic demand and favorable external trends aligned with the ADO’s projections announced in April.
The main risk to the outlook is the spread of newer, contagious COVID-19 variants, which may result in the return of stricter containment measures and stall economic activity.
“The economy has regained its footing and is on the right growth path. But the recovery remains fragile due to the threat posed by more infectious COVID-19 variants,” said ADB Philippines Country Director Kelly Bird. “Vaccination remains key to the economy’s safe reopening. We are actively supporting the government’s efforts to achieve its national vaccination targets through our health-related assistance.”
The government has focused on vaccinating Filipinos living in main urban areas such as Metro Manila, which records the highest incidences of COVID-19 cases. As of 15 September 2021, 84% of Metro Manila residents aged 18 and older, or 8.2 million people, have received at least one dose of a COVID-19 vaccine, and 63% have been fully vaccinated. Overall, as of mid-September, 22 million people nationwide had received a first jab and 17.7 million were fully vaccinated.
Public infrastructure disbursements rose 39.1% year-on-year in July, and the government is on track to achieve its target of raising infrastructure spending to at least 5% of GDP in 2021 and 2022, up from 4.8% in 2020.
The economic recovery will be boosted by the government’s policy reforms and expansionary fiscal program, with a fiscal deficit of 7.5% of GDP expected in 2022, the report says. The National Employment Recovery Strategy adopted by the government in June 2021 focuses on recovery in quality jobs, upskilling workers, expanding social protection and active labor market programs. Among the government’s priority policy reforms are proposed legislations to improve the investment climate.
Inflation forecasts are unchanged at 4.1% in 2021 and 3.5% next year, according to the ADO Update. With inflation expected to fall back within the central bank’s 2% to 4% target range and a gradual recovery in domestic demand, the government’s monetary policy stance is expected to stay accommodative.
The report says the country’s current account surplus will narrow to a revised 1.0% of GDP this year and 0.8% in 2022, with a stronger-than-expected rebound in imports, including for capital goods and raw materials. A pickup in merchandise exports, as well as receipts from business process outsourcing and higher remittances from Filipinos overseas, will help lift the current account.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.