Security Bank economist forecasts strong economic growth for Philippines in 2022

Security Bank Corporation expects the Philippine economy to bounce back in 2022, attributing the rebound to multiple factors such as the easing of mobility restrictions, higher number of fully vaccinated Filipinos, as well as the roll-out of booster shots.

“We foresee the Philippine GDP growing by 6.5% on a year-over-year basis in 2022 as we head towards the normalization of our daily lives. We’re seeing encouraging data that signifies sustained long-term economic recovery, with continued improvements in private consumption, manufacturing production, public infrastructure spending, and external trade,” says Robert Dan Roces, Assistant Vice President and Chief Economist at Security Bank.

The continued vaccination of Filipinos has allowed the economy to slowly reopen, which in return boosted consumer and business confidence. According to the Department of Health, over 42 million Filipinos have received their complete dose of the COVID-19 vaccine while over 55 million have received their first dose as of December 14.

“With looser curbs, mobility data in the country may reflect a strong rebound in domestic economic activity and improved business confidence,” adds Roces.

Inflation in the new normal

With the price of commodities constantly fluctuating due to the uncertainties of the global pandemic, Roces expects that the Philippines will post an average inflation rate of 3.5%, attributing this to global oil price movements, elevated commodity prices, external supply chain disruptions, and import-dependence on certain food items.

“We foresee that the Bangko Sentral ng Pilipinas will still have sufficient room to maintain its accommodative monetary policy stance as base effects will offset these upside risks,” he said.

Looking at the global economy in 2022, Roces sees oil prices remaining elevated next year, with the increasing demand for oil as people start to travel again for business or leisure.

“With oil demand up in 3Q2021 as lockdown measures were lifted, global demand is now approximately 3% below its pre-pandemic peak, with the strongest demand seen in China. Oil demand may exceed pre-pandemic levels in 2022 albeit on a gradual trajectory,”

Security Bank sees crude oil prices to remain elevated next year as global output recovers and demand steadies. However, the price spikes in crude that we have seen lately may become less pronounced.

“Consumption will remain a key driver as we look at growth for Q4. Overall investor sentiment continues to remain positive despite the threat of the Omicron variant prolonging the COVID-19 pandemic. We predict that herd immunity might be achieved in the country by March to May 2022, with vaccine rollouts continuing exponentially throughout the Philippines,” Roces concluded.