Economic Outlook for 2022: Looking Beyond the Pandemic Endgame

By Dan Napa

On March 1, 2022, the Manila Times held a webinar entitled “Economic Outlook for 2022: Looking Beyond the Pandemic Endgame”. The main speaker for this event was Governor Benjamin Diokno of the Bankgo Sentral ng Pilipinas (BSP).

Gov. Diokno started his speech by highlighting the economic performance of the Philippines since the global slump of 2020. The country’s GDP fell to 17% in the 2nd quarter of 2020, coming from a sustained 6% year-on-year growth from 2015 to 2019. From there, the 3rd quarter of 2020 saw the slow opening of economic activity. It wasn’t until the 2nd quarter of 2021 that the GDP was able to recover to a high of 12%. This was fueled largely by the national vaccination drive and the opening of the services industry, which drove domestic spending back once again. Since then, the growth has been sustained, with a few bumps experienced during the surges in the 3rd quarter of 2021 and the 1st quarter of 2022.

As for employment, the country had a record-high unemployment rate of 17.6% in April 2020. This was due to massive layoffs, especially in the services and manufacturing sector, where companies could not support the daily wage of employees due to restrictions in operations. The unemployment rate has since then recovered to an average of 6.6% since January of 2021, but this is still 2% higher than the previous unemployment rate of 4% in 2019.

Manufacturing activities in the country started to normalize in January 2022. The Purchasing Managers’ Index (PMI) has always been the standard by which the productivity of the manufacturing sector has been measured. Much like the GDP and the unemployment rate, the PMI showed the same trend in dipping and recovery from April of 2020 to December of 2021. Global supply chain issues were a major contributor to this due to international travel restrictions. More recently, the Russia-Ukraine conflict has been predicted to become a significant factor in global fuel prices which will, once again, influence mobility and the supply chain.

Gov. Diokno highlighted the performance of the BSP by showing the inflation trend of the Philippines throughout the last two-year period. Overall, the inflation rate of the Philippines was kept within 2–5%, with a 3% average during the pandemic period. The BSP, together with the International Monetary Fund (IMF) and the Asian Development Bank (ADB), estimate that the inflation rate in 2022–2023 will be within 3–3.7%.

The BSP was able to achieve this controlled inflation rate due to a number of factors. First were short-term provisional advances to the National Government; the second was to purchase government securities in the secondary market; the third was to remit dividends to the National Government. These measures, along with regulatory and operational relief measures, were key to sustaining the spending power of the Philippine Peso amid the rising prices of commodities during the pandemic period. It is worth noting that the lowering of the reserve requirements for banks, as well as the lowering of interest rates, help stimulate the economy and increase liquidity in the market.

In summary, the Philippines is well on its way back to pre-pandemic GDP performance. Vaccines, together with the opening of the economy, have been vital in regaining the lost luster of the country. The BSP has been very active — on a micro level — in managing our fiscal policies, giving the country sound economic fundamentals. However, external factors are still something to be wary about, especially with the looming threat of new COVID variants, as well as a possible global conflict. Anything can still happen in 2022 and beyond.

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About the author:

Dan is a Business Management graduate of the Ateneo de Manila University. His interests are shipping, sports, radio, game development, and animation industries. When he’s not working, Dan can be seen spending time on his bike. He loves riding anything with two wheels and often goes on adventures around the city or in the neighboring mountains surrounding Manila. His love for bikes is only surpassed by his love for food; so far, food has been winning.