GDP on track to hit pre-pandemic level by Q3 2022

THE PHILIPPINE ECONOMY is expected to return to its pre-pandemic level by the third quarter of 2022, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said, citing the decline in coronavirus infections and the improving vaccination rate.

Mr. Diokno told reporters in a Viber message gross domestic product (GDP) growth prospects “appear bright,” after GDP expanded by 7.1% in the third quarter.

“Based on recent developments including the ramped up vaccine rollout and the ebbing COVID-19 (coronavirus disease 2019) cases, the Development Budget Coordination Committee GDP growth targets of 7-9% in 2022 and 6-7% in 2023 look doable,” he said.

“These latest forecasts suggest that the country’s real output will revert to its pre-pandemic level by the third quarter of 2022, if not sooner,” he added.

This is more optimistic than Mr. Diokno’s statement in September when he said the economy could only return to its pre-pandemic level by the fourth quarter of 2022 or the first quarter of 2023.

More than a third (34.14%) or 36.907 million of the Filipinos have been fully vaccinated against COVID-19.

The number of new COVID-19 infections have also declined in recent weeks, while mobility curbs have been relaxed in Metro Manila. The Health department reported 1,926 cases on Sunday, bringing the active cases to 28,102.

Mr. Diokno said the central bank could “continue to be patient and continue its accommodative monetary policy stance.”

He cited October inflation which eased as food supply conditions improved.

The consumer price index stood at 4.6% in October, slower than 4.8% in September as food prices increased slower. This brought inflation year to date to 4.5%, which is still above the 4.4% forecast by the BSP for 2021 as well as the 2-4% target.

“With sufficient slack in the labor market and the expected higher participation rate as workers re-enter the workforce, there is little likelihood of a wage hike as the vaccine rollout quickens and consumer confidence rises while economic activity expands,” he said.

Mr. Diokno said this contrasts with the inflationary pressures in the United States, European Union and United Kingdom, which are due to supply chain bottlenecks and higher labor costs.

“The threat of the peso depreciation is fading as the peso is expected to appreciate, with the prospect of stronger overseas Filipino remittance inflows in the last few weeks of the year in time for the Christmas holidays,” he said.

The peso ended Friday trading at P49.85 a dollar, gaining 31.5 centavos from its P50.165 close on Thursday, based on data from the Bankers Association of the Philippines. The currency also appreciated by 48 centavos compared with its close of P50.33 per dollar a week earlier.

The BSP chief also ruled out asset price bubbles, which could potentially threaten financial stability.

“There appears to be no pressure on rising real estate prices. The increase in real property prices in the National Capital Region (NCR) is either flat or slightly down, though there is a slight increase in prices in few places outside NCR,” he said.

In the second quarter, the BSP’s Residential Real Estate Price Index declined by an annual 9.4%, worse  than the 4.2% decline in the first quarter. This was mainly caused by the decline in condominium units and single houses.

The Monetary Board will have its policy setting meeting on Thursday, Nov. 18. All 20 analysts polled by BusinessWorld expect it to keep interest rates unchanged. — Luz Wendy T. Noble