The Philippine economy likely withstood the Omicron surge at the start of this year and sustained growth during the first quarter – estimated by economists to range from 5.5 per cent to as high as 8.3 per cent year-on-year.

Beyond the possibly strong end-March gross domestic product (GDP) performance, which the government will report on May 12, economists watching the Philippines flagged high debts and a yawning budget deficit, elevated inflation that could temper consumer spending, as well as some excess baggage carried by leading presidential candidates who may win the elections, which could slow down the Philippines’ flight to economic recovery this year.

On May 8, Secretary of Socioeconomic Planning Karl Kendrick Chua said in a statement that the Philippine economy “will return to its pre-pandemic growth this year as the country continues to build on progress in recovering from Covid-19 from the first half of the administration”.

Chua, who heads the state planning agency National Economic and Development Authority (Neda), declined to say if the first-quarter output likely already reverted to pre-Covid-19 levels, pending the official Philippine Statistics Authority (PSA) report.

Of the 18 first-quarter GDP growth forecasts collected by Philippine Daily Inquirer last week, Bank of the Philippine Islands’ Emilio Neri Jr had the highest estimate of 8.3 per cent.

But Neri said the “trade shock and destructive effects of soaring commodity prices on overall demand” – wrought by the Ukraine conflict – tempered his growth expectation for full-year 2022 to six-to-6.5 per cent from seven-to-7.5 per cent previously, especially if oil prices remained close to $100 per barrel.

The government targets seven-to-nine per cent GDP expansion this year on the back of further economic reopening by dismantling stringent pandemic restrictions and ramping up mass vaccination.

However, most of the economists polled by Philippine Daily Inquirer said actual growth in 2022 would fall below target, to as low as 4.5 per cent, as estimated by Pantheon Macroeconomics’ Miguel Chanco.

Even the most optimistic estimate of 7.5 per cent, by Capital Economics’ Alex Holmes, was nearer the lower end of the growth goal range.

“Even our forecast for above-trend growth of 7.5 per cent this year is consistent with the economy being 13 per cent smaller by the end of this year than if the pandemic had never happened,” the London-based think tank Capital Economics said in a May 6 report.

For the first quarter of 2022, growth projections varied widely: 7.6 per cent year-on-year for Ateneo de Manila University’s Ser Percival Pena-Reyes; for Philippine National Bank’s Alvin Joseph Arogo, 7.4 per cent; Goldman Sachs Economics Research, 7.2 per cent; Regina Capital’s Luis Gerardo Limlingan, Rizal Commercial Banking Corp’s Michael Ricafort, Security Bank’s Robert Dan Roces, and S&P Global Market Intelligence’s Rajiv Biswas, seven per cent; Sun Life Financial’s Patrick Ella, 6.9 per cent; Holmes, 6.7 per cent; BDO Unibank’s Jonathan Ravelas, 6.5 per cent; China Bank’s Domini Velasquez and Oxford Economics’ Makoto Tsuchiya, 6.3 per cent; DBS’ Han Teng Chua, 6.2 per cent; HSBC Global Research and ING’s Nicholas Antonio Mapa, 6.1 per cent; and Chanco, 5.9 per cent.

UnionBank of the Philippines’ Ruben Carlo Asuncion had the least optimistic first-quarter growth forecast of 5.5 per cent year-on-year, but he said that it was “robust enough” given the GDP contraction a year ago when the Philippines’ worst post-war recession extended up to the first quarter of 2021 due to the then prolonged Covid-19 quarantine measures.

For Pena-Reyes, “it might be difficult to meet” the full-year seven-to-nine per cent growth goal.

“With developed economies adapting to the pandemic, many find themselves experiencing the after-effect of long port congestion and supply chain disruptions leading to delays in the movement of output.

“These have caused inflation to accelerate by double than the averages in many developing countries … Central banks must tighten monetary policy by increasing interest rates to counter inflation,” Pena-Reyes explained.

“We have already felt the headwinds of higher oil prices and the translation into higher inflation. By June, the BSP will likely increase interest rates. The peso is currently trading at 10 per cent weaker than it was a year ago. With the country depending on imports, including food, we are certainly passing higher prices into our economy,” he added.