ADB hikes 2022 PH growth forecast to 7.4%

Metro Manila (CNN Philippines, December 14) — Manila-based multilateral lender Asian Development Bank (ADB) sees the Philippine economy growing at a much faster pace this year following its stronger-than-expected momentum in the third quarter.

Based on its Asian Development Outlook 2022 Update released Wednesday, ADB's growth estimate for this year has been revised upward to 7.4% from 6.5%.

The regional lender's forecast is at the higher end of Philippine economic managers' target band of 6.5-7.5% for 2022.

This came as the country beat the bleak forecasts of economists for the July-September period, recording 7.6% gross domestic product (GDP) growth, slightly faster than the 7.5% in the second quarter.

READ: PH beats Q3 economic growth forecasts despite inflation woes

"GDP grew by 7.7% in the first three quarters of this year, driven by robust private consumption and investment and by sustained public infrastructure spending," ADB said in its report.

"Rising employment, tourism recovery, expanding production and retail sales, and public investment will continue to support growth," it added.

However, the Philippines may fail to keep this growth rate due to measures being done to temper high inflation, as well as external factors affecting the local economy.

"The GDP growth forecast for 2023 is revised down to accommodate monetary tightening, a sharper growth slowdown in the advanced economies, and continuing uncertainty arising from the Russian invasion of Ukraine," it said.

The 6.3% estimate in September was revised to 6% in Wednesday's report.

Amid soaring commodity prices, the Marcos administration has been shadowing the US Fed's interest rate hikes. In November, the policy-making Monetary Board (MB) announced its decision to jack up the cost of borrowing by 75 basis points (bp) or three-quarters of a percentage point, bumping up the key interest rate to 5%.

With higher interest rates, businesses and consumers are seen to spend less due to a more expensive borrowing.

Data from the Philippine Statistics Authority (PSA) showed November's inflation further accelerated to 8% from the previous month's 7.7%, stemming from a rise in food prices and non-alcoholic beverages.

"Inflation forecasts for the Philippines are raised for 2022, mainly in response to higher food prices, but maintained for 2023 [at 4.3%]," it said