Manila business district

Philippines’ economic recovery remains strong

On May 12th the Philippines released its first-quarter GDP data, which show quarter-on-quarter growth of 1.9%—slower than the 3.6% recorded in October-December. In annual terms, the real GDP growth rate accelerated to 8.3%, compared with 7.7% in the previous quarter.

Why does it matter?

The strong first-quarter GDP data exceeded our expectations and build on the robust recovery that began in late 2021. There remain major risk factors to the prospect of a robust recovery, chief among them the uncertainty surrounding the competency of the incoming president, Ferdinand “Bongbong” Marcos Jr, and an acceleration of inflation amid the war in Ukraine. However, for the Philippines’ economy, more than 70% of which relates to activity associated with domestic consumption, the absence of any significant lockdowns and mobility restrictions will provide a strong basis for growth, especially considering the low base for much of 2021.

The growth is also likely to validate the government’s approach and bodes well for its services-dependent economy for the rest of 2022. The performance in January-March is among the first indicators of the ramifications of the government’s shift to treating the coronavirus as an endemic disease. Since late 2021, amid the spread of the Omicron variant, the Philippines has eschewed the lengthy, robust lockdowns that characterised its previous response to the pandemic. 

Despite the surge in caseloads in the first two months of the year, private consumption growth accelerated to 10.1% year on year, from 7.3% in October-December. By contrast, government consumption growth slowed to 3.6% year on year, from 7.2% in October-December, which was probably the result of the lapse of some relief programmes as the government sensed less urgency to continue them amid further relaxed mobility restrictions. In terms of sectoral trends, services and industries recorded mildly accelerating annualised growth for the same reason, to 8.6% and 10.4% respectively.

What next?

We consider a return to the previous policy of lockdown unlikely, as the country’s healthcare system has proved capable of managing the spread of the Omicron variant. Economically damaging containment measures will probably only be deployed again should a more lethal and equally infectious variant emerge to be the dominant strain of the coronavirus. With this being outside our core forecast, we will probably raise our forecasts for economic growth in 2022, from 6% currently.

More award-winning insights on the economic outlook for the Philippines’ can be found in EIU Viewpoint, our new analysis service. EIU Viewpoint provides unmatched forecasts, analysis and data for nearly 200 countries and six key industries, helping organisations identify prospective opportunities and potential risks.