SCB Economist: PH GDP to grow 5% in 2021; 7.5% in 2022

An economist of the Standard Chartered Bank (SCB) said the  Philippine gross domestic product (GDP) may have expanded by 5 percent in 2021 and will expand by 7.5% this year.

SCB economist for Asia and the Philippines, Jonathan Kho said both GDP projections are within the inter-agency Development Budget and Coordination Committee’s (DBCC) assumption of a 5-5.5& expansion for last year and 7-9 % for 2022.

Kho. in a virtual briefing, said the projected quarter-on-quarter output for the last quarter of 2021 is 6.5%, higher than 3.8%  from July to September that year.

He explained that their growth projection for the domestic economy this year is higher than the previous forecast of 6.5% on account of the base effects, continued economic re-opening that boosts employment growth, fiscal consolidation, and accommodative monetary policies.

Kho said they actually expected stronger economic recovery last year but the Covid-19 Delta variant surge greatly affected the Asia-Pacific region.

“The Philippines was also hit, especially in Q2, but after that, we saw a pretty strong recovery in Q3. So just on the basis of that, I think, on the back of lower base effect in 2021, as well as, I think, the pretty strong recovery we saw in Q3 and probably going forward, our growth forecast was revised higher to 7.5%,” he said.

He said the domestic economy snapped back from a five-quarter contraction starting in the second quarter of 2021 when it posted a growth of 12%, followed by a 7.1% expansion in the next three months. He also noted that the employment situation in the country is improving, calling it a plus factor for economic recovery.

Philippine Statistics Authority data show that unemployment rate declined to 6.5% in November 2021 from 7.4% in the previous months, and 8.7% at the start of the year. However, the underemployment rate rose to 16.7% last November from 16.1% the previous month.

Kho said the general improvement in the labor market is among the factors they consider that will prompt monetary authorities to hike key policy rates in the fourth quarter of this year.

The Monetary Board (MB) of the Bangko Sentral ng Pilipinas’ (BSP) slashed the central bank’s key rates by a total of 200 basis points in 2020 to help buoy the domestic economy from the impact of the pandemic.

Kho said they forecast the key rates to be hiked by a total of 50 basis points this year and 100 basis points next year, noting that the BSP has adopted an “ultra-accommodative” policy stance since the pandemic began.