Fitch Solutions, a unit of Fitch Group, raised on Thursday its 2022 growth forecast for the Philippines to 6.6 percent from its previous estimate of 6.1 percent, taking into account the robust expansion in the first two quarters.
Fitch Solutions said in a report the slowdown in the second-quarter GDP growth to 7.4 percent from 8.2 percent in the first quarter was in line with expectations, “although the pace of deceleration… was more modest than we had predicted.”
“We at Fitch solutions have raised our forecast for real GDP growth in the Philippines to 6.6 percent year-on-year in 2022, from 6.1 percent previously, following the recent growth print of 7.8 percent year-on-year in H122 [first half of 2022],” it said.
It said mounting headwinds from a combination of softer global demand, elevated energy prices and tightening monetary policy would continue to see growth decelerate in the second half.
“Overall, GDP growth in the first half benefited from the reopening of borders in February and election-related spending. Moreover, a relatively accommodative central bank has also supported consumption and investment to some extent,” it said.
Fitch Solutions said these tailwinds helped offset external headwinds stemming from elevated energy prices, a slowdown in the world economy and tightening global monetary conditions.
“However, we believe that these tailwinds will continue to fade over the coming months, while growth headwinds intensify, leading to slower growth in H222,” it said.
Economic Planning Secretary Arsenio Balisacan said the second-quarter performance was the second best in the region next to Vietnam’s 7.7 percent. It was faster than Indonesia’s 5.4 percent and China’s 0.4 percent.
The main contributors to the second-quarter growth were wholesale and retail trade, repair of motor vehicles and motorcycles, 9.7 percent; construction, 19.0 percent; and transportation and storage, 27.1 percent.
Household final consumption expenditure grew by 8.6 percent in the second quarter. Government final consumption expenditure rose 11.1 percent; gross capital formation, 20.5 percent; exports of goods and services, 4.3 percent; and imports of goods and services, 13.6 percent.
The manufacturing sector’s growth decelerated to 2.1 percent in the second quarter from 22.4 percent a year ago on weaker growth in computers, electronic and optical products, chemical and chemical products and food products.
The slowdown may be due to inflationary pressures brought about by the Russia-Ukraine war, weakening global demand and supply chain disruptions brought by lockdowns in China.
Finance Secretary Benjamin Diokno said he remained optimistic for the second half.
“While [there] might be some slowdown in growth in the second half of the year, reflecting the downgrade in the outlook for the global economy, we still expect the DBCC [Development Budget Coordinating Committee] growth target for 2022 will be achievable as we continue the ongoing infrastructure program, maintain macroeconomic stability and take advantage of the recently approved amendments to the PSA[Public Service Act], FIA [Foreign Investment Act], and RTLA [Retail Trade Liberalization Act] to foster investment-led recovery,” Diokno said.
Balisacan said the economy should grow by 7.2 percent in the second half to achieve the upper end of the target range of 6.5 percent to 7.5 percent for the year.