MANILA, Philippines — Regional watchdog Asean+3 Macroeconomic Research Office (Amro) raised its growth forecast for the Philippines to 6.5% from 6.2% previously, but urged the government to maintain support for the Philippines. sectors marked by prolonged COVID-19. pandemic.
“Economic recovery in the Philippines is firmly on track – despite recurrent waves of COVID-19 infections in 2021 – and is expected to accelerate following further easing of mobility restrictions and continued policy support,” Amro said. in a statement Friday (March 11). Amro’s latest assessment was based on its annual consultation with Philippine economic leaders held online from February 18 to March 8.
Amro’s Chief Economist, Siu Fung Yiu, projected the Philippines’ gross domestic product (GDP) growth to reach 6.5% in 2022 and 2023. Amro’s growth forecast for this year was lower than the government’s 7-9% target. Its estimate for next year, meanwhile, was within the Philippines’ 6-7% growth target.
“Continued fiscal support and a high vaccination rate will help keep the economy relatively open and sustain the momentum of recovery,” Yiu said.
“For 2022, government spending will continue to be the main driver of growth, with the private sector recovery gaining momentum as the economy reopens, supported by better economic prospects, improving confidence and a favorable external demand,” Amro said.
Amro nonetheless urged the Philippines to put in place a fiscal consolidation plan that “should improve fiscal sustainability without undermining economic recovery.”
The fiscal consolidation strategy to be presented and delivered by the Duterte administration’s economic team to the next Philippine President aimed to reduce the record budget deficit and pay down the debt that has accumulated amid the pandemic.
The fiscal consolidation plan may include new or higher taxes, spending cuts in non-priority sectors, as well as economic growth engines to increase revenue.
“A gradual reduction in the fiscal deficit is deemed appropriate as the recovery gains further momentum in the near term,” Amro said.
“However, the pace of fiscal consolidation should be accelerated once private sector growth becomes self-sustaining. The authorities should also continue to improve the efficiency of public spending programs, while improving revenue collection,” did he declare.
“The overall fiscal policy stance is assessed as broadly neutral in 2022 under the current national budget. This policy stance is appropriate as the private sector recovery is expected to become more self-sustaining going forward,” he added. .
But Amro noted that the recovery in the Philippines remained fragile – “while the labor market has rebounded strongly, unemployment remains high and job quality has deteriorated,” he said.
“Some lasting damage caused by the pandemic has become clearer, the most damaging of which relates to human capital, making it urgent to take action to build resilient, sustainable and inclusive long-term growth,” Amro said.
Soaring global oil prices due to the war between Ukraine and Russia will also pose upside inflation risks this year, Amro said, although he expected the rate of increase in commodity prices to rise. basis would decline to 3.7% and 3.3% next year, from 3.9% last year. year.
In addition, Amro said that “a potential resurgence of COVID-19 infections remains a key risk to the recovery and that the depreciation of corporate balance sheets continues to pose a risk to the soundness of the banking sector in the near term”, even though “the significance of these two risks may have diminished due to a higher vaccination rate and the resumption of economic activity.
As global interest rates normalize and financial conditions tighten, Amro said “the Philippine economy is well positioned to weather the negative impact, but the peso exchange rate may come under some pressure. “.
“The central bank of the Philippines should continue its accommodative monetary policy in 2022 to support the recovery and consider reducing its policy stance as the recovery gains momentum and the output gap narrows,” Amro said.
“Key central bank relief measures are still in place to ensure continued support for the recovery of businesses, households and the economy as a whole,” Amro added, referring to the Bangko Sentral ng Pilipinas (BSP ).
“The government must leverage public and private efforts to mitigate the scarring effects of the pandemic and address structural challenges for more resilient and sustainable long-term growth,” Amro said.
“The country’s legislative efforts, including passing amendments to the Retail Trade Liberalization Act, the Civil Service Act and the Foreign Investment Act, are welcome,” Amro said.
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