NextGen Day

MANILA, Philippines — Given the high job creation in December 2021 and the predicted increase in infrastructure spending, Philippine economic development is expected to remain solid this year, despite the damage from the Omicron version in January.

The higher-than-expected 7.7% gross domestic product (GDP) in the last quarter of 2021 “rekindled optimism that the economy is back on the rapid growth track,” according to the February 2022 issue of the Market Call, a monthly joint publication of First Metro Investment Corporation (FMIC) and the University of Asia and the Pacific (UA&P).

According to the report, 797,000 positions were generated in December, increasing the total number of jobs produced in the last quarter to 2.7 million, which bolstered economic growth throughout the period.

According to the study, the stronger-than-expected growth in October through December resulted in a full-year print of 5.6 percent.

The debt-to-GDP ratio of 60.5 percent by the end of last year, which was lower than the publication’s projection of 63 percent, was a boost for domestic growth.

Another encouraging sign is the slowing of domestic inflation, which fell to 3% in January from 3.2 percent the previous month, according to the report.

“Despite a spike in Omicron variant instances in January, we believe growth will pick up in 2022, especially given the massive job gains in Q4 (fourth quarter) 2021.” Because significant projects are exempt from election expenditure prohibitions, infrastructure spending should support H1 (first half) growth,” it noted.

With growth expected to remain strong, the report sees no reason for the Bangko Sentral ng Pilipinas (BSP) to raise policy rates in the first half of this year “as M3 (domestic liquidity) growth has remained fairly tepid and a robust economic recovery well placed before the monetary authorities tighten policy despite expected hikes in the United States.”

As part of the BSP’s initiatives to help cushion the local economy from the impact of the epidemic, the central bank’s key policy rates have been reduced by a total of 200 basis points in 2020.

The overnight reverse repurchase (RRP) rate is currently at a record-low 2%, the overnight deposit rate is at 1.5 percent, and the overnight lending rate is at 2.5 percent, according to the BSP.

Despite these good trends, the research predicts a weakening of the peso against the dollar.

“With bloated trade deficits reaching new highs and the US currency remaining strong, the peso will face upward pressure,” it concluded.

To date, the local currency has held its value against the US dollar at 51 cents.

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