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ADB raises its prognosis for Philippine growth in 2022 while cutting its expectation for 2023.

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Following the higher-than-expected output in the first three quarters of this year, the Asian Development Bank (ADB) increased its 2022 growth forecast for the Philippines to 7.4 percent but cut its 2023 projections.

The Manila-based lender reduced its 2022 growth projections from the previous 6.5 predictions, although it increased its 2023 forecast to 6% from 6.3%. The newest addendum to the lender’s Asian Development Outlook (ADO) 2022, which was published on Wednesday, contains these numbers.

In a briefing on Wednesday, Kelly Bird, the country director of the Asian Development Bank (ADB) for the Philippines, explained that the actual output in the first three quarters of this year, which was around 7.6%, was higher than the government’s forecast of 6.5 to 7.5 percent growth for the entire year.

In the first, second, and third quarters of this year, the economy saw yearly growth of 8.2, 7.5, and 7.6 percent, respectively.

According to Bird, the Philippine economy “has shown strong underlying growth momentum and resilience in 2022 and this is likely to continue in 2023, with GDP growth converging towards its long-term growth rate of roughly 6 percent.”

The ADB representative linked the impact of high inflation, higher interest rates, and the sharper-than-expected slowdown of advanced economies to the drop in their 2023 growth output prediction for the domestic economy.

Increases in the pace of price growth, he claimed, are concerning not just to monetary authorities but also to consumers because they have a detrimental effect on the latter group’s purchasing power.

In November of last year, the domestic inflation rate increased to 8% from 7.7%.

The most recent inflation reading is the highest since November 2008, and it raises the year-to-date average to 5.6 percent, which is higher than the government’s target range of 2 to 4 percent.

Given the impact of rising global oil prices as a result of the Russia-Ukraine conflict, the inflation rate has exceeded the target range since last April.

Private investments are anticipated to be impacted by the increased interest rates, which are the result of the central bank’s monetary policy measures to assist contain inflation upticks. This will impede rapid economic expansion.

Despite these difficulties, Bird claimed that the execution of the numerous infrastructure projects act as a stimulant for domestic growth, pointing out the present administration’s effort to keep up the rise in infrastructure investments.

In his words, “the Philippines was in a very excellent position to be able to maintain growth for the next two to three years” due to the increasing infrastructure spending.

Bird also mentioned the labor market’s ongoing improvement, which is anticipated to continue over the following year.

According to figures from the Philippine Statistics Authority (PSA), the country’s employment rate increased to 95.5 percent in October from 95 percent the month before, which is thought to be the highest level since January 2020.

The labor force participation rate (LBPR) stands at 64.2 percent, up from 62.6 percent a year before, and the unemployment rate during the same time period decreased to a pre-pandemic level of 4.5 percent.

According to Bird, the domestic economy’s ongoing recovery is the result of actual underlying fundamentals rather than just a simple increase in demand as business resumes.

According to him, the manufacturing industry is still improving, as seen by the recent increase in the production index.

According to Bird, the growth of remittances from Filipinos living abroad is still significant. While the peso’s value decreased in relation to the US dollar, it gained in value, increasing the recipients’ purchasing power.

The domestic economy will be able to advance toward its long-term growth potential thanks to these underlying growth fundamentals, which are anticipated to propel growth, not just this year but over the next two to three years as well.

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