‘PHL’s H2 growth rests on new economic team’

THE performance of the Philippine economy in the second half of the year will rest squarely on the shoulders of the incoming administration’s economic team, according to a local think tank.

In its latest Market Call report, First Metro Investment Corp. and University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research said the growth momentum which gave rise to the 8.3-percent growth in the first quarter will spill over to the second quarter.

However, the performance of the economy in the third and fourth quarters will be determined by the policies to be implemented by the new economic team. Much uncertainty will greet the economic managers as the pandemic continues and commodity prices remain elevated.

“The robustness in the economic recovery, founded heavily on employment gains, should spill over into Q2 [the second quarter]. And while a tighter fiscal space and inflation pose serious headwinds in H2 [second half], an economic team of high-quality technocrats in the new President’s cabinet can handle the emerging scenario,” the report stated.

One of the major risks that post the most uncertainty to the economy is the Russia-Ukraine war which will mark its first 100 days. The war began in February 24 this year and will reach 100 days on June 3. FMIC-UA&P Capital Markets Research said commodity prices, particularly oil prices, could remain elevated until the war in Eastern Europe is resolved. This uncertainty will lead to an average inflation of above 5 percent in the country this year.

In April, the Philippine Statistics Authority (PSA) reported that inflation nationwide increased to 4.9 percent in April 2022. The average inflation for the first four months of the year stood at 3.7 percent. The inflation in April is the highest recorded inflation since January 2019. Inflation in April 2021 was lower at 4.1 percent while March 2022 was at 4 percent.

“The war remains unpredictable, but the second-round effects of unusually elevated crude oil prices have affected other commodities. With higher inflation comes higher interest rates which impinges on spending by consumers and borrowing by firms,” the report stated.

Earlier, the Duterte administration may have posted the highest growth rate in over three decades but economists are not optimistic that this performance is sustainable this year and in the medium term. The Philippine Statistics Authority (PSA) announced that the economy posted a growth of 8.3 percent in the first quarter of 2022. This is the highest GDP growth since the fourth quarter of 1988 when GDP grew 12 percent.

However, economists believe that inflationary pressures which marked the skyrocketing oil prices in the second quarter, as well as the mobility restrictions that are still in place will prevent the country from posting higher growth after the first quarter.

Socioeconomic Planning Secretary Karl Kendrick T. Chua said the single biggest contributor to the economy’s growth in the first quarter is the reopening of the economy.

With many more Filipinos willing to go out and report to their workplaces, more economic activities were made possible.

However, he recognized that the lockdown in January due to the Omicron surge and the absence of face-to-face classes prevented the economy from growing faster.

He noted that the economy lost P31 billion per week due to the Alert Level 3 status and another P12 billion per week due to the absence of face to face classes.

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