Philippine economy seen to lead recovery

The country’s economic growth is projected to return to 6.5% by end of 2022, only to slightly fall back to 6.3% in 2023 as a result of increased economic activity due to election spending, according to the latest World Economic Outlook of the International Monetary Fund (IMF). 

This IMF estimate for the Philippines is higher than the 5.3% average growth of the top countries in the region: Vietnam at six percent, Malaysia 5.6%, Indonesia 5.4% and Thailand 3.3%. 

The 2022 projection is below the Philippine government’s target of seven percent to nine percent. 

According to the IMF, growth for India, Philippines, Bangladesh and Vietnam will be the fastest this year. 

IMF Resident Representative to the Philippines Ragnar Gudmundsson said recovery started in the second half of 2021 when the gross domestic product (GDP) grew 5.6%. 

The war in Ukraine triggered a costly humanitarian crisis that demands a peaceful resolution and affected global growth prospects, the IMF said. 

The impact of the Ukraine war is spreading worldwide, forcing the IMF to downgrade its 2022 global growth forecast to 3.6%. 

The economic slowdown, which is 0.8 points lower than its previous estimate in January, can be attributed to surging prices, shortages and rising debt levels, the IMF said. 

The fallout has been felt most acutely in the poorest nations, threatening to erase recent gains as the world started to recover from the COCID-19 pandemic, and the risks and uncertainty remain high, the IMF warned. 

IMF chief economist Pierre-Olivier Gourinchas said in the report, “The economic effects of the war are spreading far and wide — like seismic waves that emanate from the epicenter of an earthquake.” 

The IMF reported that Ukraine suffered a 35% collapse of its economy this year, while Russia’s GDP will fall 8.5% — more than 11 points below the pre-war expectations. 

European nations is expected to experience much slower growth as the war drives up fuel and food prices, pushing inflation higher around the world and keeping it high for longer than expected. 

USA and China also will feel the effects of the war and the ongoing impact of the pandemic, with US growth expected to slow to 3.7%, and China’s to 4.4%. 

The IMF official cautioned that the overall outlook is highly uncertain and things could get worse if the war is prolonged and tougher sanctions imposed on Moscow. 

“Growth could slow significantly more while inflation could turn out higher than expected if, for instance, sanctions aimed at ending the war extend to an even broader volume of Russian energy and other exports,” Gourinchas said. 

Meanwhile, the still prevailing pandemic plus lockdowns in China to defeat renewed COVID outbreaks are slowing activity, including in manufacturing hubs, which “could cause new bottlenecks in global supply chains.” 

The latest crisis hit as the global economy “was on a mending path but had not yet fully recovered from the COVID-19 pandemic,” Gourinchas said. 

That has fueled an acceleration of inflation — expected to hit 5.7% in advanced economies this year and 8.7% in developing nations — which endangers the gains of the past two years. 

Inflation will be elevated for “much longer” than previously expected the report said. 

The price pressures have prompted central banks in many countries to begin to raise interest rates to stamp down inflation, but that will hurt highly indebted developing nations, the report noted.