2022 Will be an Auspicious Year
The string of economic and health data last week will bode well for the incoming year. The surprisingly strong gross domestic product (GDP) figures in the third quarter and falling daily Covid-19 cases are the right mixes for a strong economic recovery.
The third-quarter GDP results, coming after another lockdown episode for most of that three-month period, are proof that the economy can reopen, notwithstanding the stringent quarantine restrictions in Metro Manila and nearby provinces. As it turned out, we were able to expand the economy and curb the Covid-19 infection rate at the same time in a successful balancing act. Resorting to granular or neighborhood lockdowns, instead of region-wide quarantine measures to contain the virus spread, and partially opening the economy with less mobility restrictions allowed many business and commercial establishments to operate and create job opportunities.
The Philippine economy grew 7.1 percent in the third quarter across almost all major sectors after expanding an adjusted 12 percent in the previous three-month period. Two consecutive quarterly growths to me are a solid indication that the economy is on its way to a strong recovery next year.
Perhaps, the most striking feature of the third quarter figures is the rebound in the household final consumption expenditure, or consumer spending. This sector on the demand side grew 7.1 percent, meaning households are spending more to purchase goods, appliances, and services in malls, dine in restaurants, shop in grocery stores, and buy meat and vegetables in the wet market. Fewer mobility restrictions enabled our consumers to roam around in public places and spend.
The manifestation of a more solid and wider economic expansion is also seen in the wholesale and retail trade, repair of motor vehicles, and motorcycles sector, which grew 6.4 percent. Manufacturing expanded 6.3 percent, while construction climbed 16.8 percent.
Public and private construction, per data of the Philippine Statistics Authority, grew 55.3 percent and 12.2 percent, respectively. All construction activities resumed regardless of an area’s quarantine status, further proof that the economy can reopen even if Covid-19 persists.
The relatively strong performance of the economy in the third quarter brings out the optimist in me. I can sense a more robust economy in the fourth quarter—a buying season that coincides with the pre-election spending of political candidates.
Other economic data appear to bolster my feeling that the economy will register a strong performance in 2022. Net inflows of foreign direct investments (FDI) as recorded by the Bangko Sentral ng Pilipinas jumped nearly 40 percent in the first eight months of 2021 to $6.4 billion from $4.6 billion a year ago. These are actual investment inflows compared with foreign capital commitments or pledges registered by other investment promotion agencies. The higher level of FDI suggests that investors remain confident in the prospects of the Philippine economy.
Our economic managers are also doing well on the inflation front despite the global trend. The October inflation rate slipped to a two-month low of 4.6 percent in October from 4.8 percent in September, mainly on lower annual increases in the prices of food. An inflation rate of lower than 5 percent for 2021 is manageable, considering the pent-up demand created by the pandemic.
The country’s gross international reserves, meanwhile, rose by another $1.35 billion in October to $107.95 billion from $106.6 billion in September. The higher foreign exchange reserves imply a healthy current account balance that will support a competitive exchange rate and provide a strong defense to a potential currency crisis.
We are also doing well in managing the Covid-19 pandemic. Our daily cases are now below 2,000 as more Filipinos are getting vaccinated. The Philippines’s daily active cases have gone down to below 30,000 last week, giving our health and economic authorities more leeway to reopen further the economy.
These positive developments in the economy and the health sector are the calm waters that we need to navigate us through the pandemic. If we play our cards right just as we did in doing away with regional and total lockdowns, I see no reason why the economy cannot expand more vigorously in the coming year.