Here’s some some good news on the Philippine economy. Our country’s gross domestic product (GDP) grew 11.8% from April to June, according to the Philippine Statistics Authority (PSA). This is great news since it’s a reversal of the 17% contraction in the same period in 2020.
Based on PSA data, the economy has turned back into growth mode “as expected in the second-quarter of the year on the back of low base effects”. This performance marks the point when the Philippine economy exits recession, ending five consecutive quarters of negative growth.
However, COVID-19, particularly the highly contagious Delta variant and the ongoing lockdowns still continue to weigh down on our economic growth for the rest of 2021.
Inflation dropping well within target for Q2
Meanwhile, despite the lockdowns of 2021, inflation in the Philippines is expected to drop within the two-to-four percent target by the end of the year. The Bangko Sentral ng Pilipinas (BSP) recently explained that inflation is behaving as expected – hopefully, this points to the Philippine economy starting to slowly recover amid the pandemic.
July marks the first time that inflation is within the BSP’s target. BSP Governor Benjamin E. Diokno explains that the inflation rate recorded in July (4%) is well within their forecast of 3.9% – 4.7% for the period. He adds that this rate is actually “consistent with the BSP’s assessment”. In fact, they predict that inflation will also be managed as “the impact of government supply-side measures take effect.”
For the BSP, inflation is projected to “remain firmly within the midpoint” of their target for 2022 to 2023. In addition, they feel that the continued implementation of “direct non-monetary interventions” that the country is doing contributes to tempering inflation rates.
Economy on the right path – but vigilance is still required
Despite this good news on the Philippine economy, the BSP acknowledges that the emergence of new coronavirus variants and the necessary lockdown measures are still “seen to pose downside risks to both demand and inflation.”
Nicholas Mapa, an economist from ING Bank, echoes this sentiment. He expects inflation to stay elevated over the next few months, including food prices. This is due to the impact of rains and flooding on the supply of agricultural goods, but also due to the implementation of the August lockdown.
This performance of the Philippine economy in the first half of the year just goes to show that we are on the right path. However, we need to remain vigilant. Hopefully, these metrics point to continued improvement. For now, we must do our part, get vaccinated if we’re not yet, and continue to practice social distancing and basic health protocols. Better days are coming!