PH economy rises above expectations with 8.3% Q1 growth

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Metro Manila (CNN Philippines, May 12) — The Philippine economy maintained its growth momentum in the first three months of 2022 as it expanded by 8.3%, Philippine Statistics Authority figures released Thursday showed.

The latest expansion outpaces the 3.8% contraction from January to March last year and 7.8% pace logged in the last quarter of 2021. The economy grew 1.9% quarter-on-quarter in seasonally adjusted terms.

The first-quarter figure is also faster than the 6.58% average forecast among 15 economists polled by CNN Philippines. Apart from base effects, analysts cited factors like efforts to further reopen the economy — with the Omicron-driven surge in COVID-19 cases in January but a quick setback — along with election spending.

Industry posted the strongest growth at 10.4%, followed by services at 8.6%. Agriculture, forestry, and fishing (AFF) fared the weakest at 0.2%. Services accounted for the biggest chunk in total economic output, followed by industry and AFF.

In terms of industries, manufacturing was the biggest contributor to growth followed by the wholesale and retail trade of motor vehicles, and transportation and storage.

Household spending -- a main driver of economic activity -- accounted for 7.5 percentage points of total gross domestic product (GDP) during the period. It is followed by construction and durable equipment.

National Statistician Dennis Mapa also reported a nominal GDP of ₱4.9 trillion for the first quarter of the year, outpacing the ₱4.43 trillion logged in the same stretch in pre-COVID 2019.

On track to full-year target band

The latest expansion is well within the 7-9% estimate range set by President Rodrigo Duterte's economic managers for 2022.

For Socioeconomic Planning Secretary Karl Chua, the "single most important driver" of growth during the quarter is the economic reopening. Many areas including Metro Manila were already under Alert Level 1 by end-March; by this month, most of the Philippines is already under the loosest classification.

Still, the National Economic and Development Authority (NEDA) chief assured they will not rest on their laurels.

"We will continuously work hard to strengthen our domestic economy against heightened external risks such as the Russia-Ukraine conflict, China's slowdown, and monetary normalization in the United States," said Chua.

The Cabinet member stressed anew the importance of bringing back face-to-face classes, which he referred to as a "significant piece missing" in the Philippines' economic rebound.

Given the latest growth rate beating market forecasts, some economists have projected the Bangko Sentral ng Pilipinas will hike interest rates this month amid skyrocketing prices.

"Looking beyond the high y/y growth figures, the overall economic recovery is, and will remain, very weak. That is a key reason to expect the central bank to normalize policy only very gradually," said Capital Economics’ Alex Holmes.

"Taking into consideration the evolving growth-inflation dynamics, we now expect the BSP to begin policy normalization next week with a 25bp hike," ANZ Research also said in a commentary, where it also projects more hikes until year-end -- putting the policy rate at 3.50% from the current 2% low.