By definition, GDP or Gross Domestic Product is the measurement of a country's total economic production and performance; it defines the total market value of all the products or goods together with the services that the economy can produce at a given time or a specific period. The higher the growth rate indicates that the economy is healthy; a healthy economy attracts more investment, and a higher investment gives a higher employment rate.
The economy of the Philippines is growing more than expected in 2022. Due to the forecasts that the flatline growth due to restrictions brought by Covid-19 in the country, the Covid-19 vaccination programs are being expanded, and investment rebound. Moreover, household consumption adds to the economy's growth in the report.
According to Asian Development Outlook (ADO), the Philippine economy can grow by 6.5% in 2022, coming from the bank's forecast in April that the growth will be 6%. But the growth projection for the year 2023 remains sitting at 6.3%.
The economic growth of the Philippines seemed to go back on its ideal track and accelerated with the help of strong domestic demand. Being backed up by employment and remittance inflows, private investments having an expansion, and public infrastructure projects are the factors that will aid the country's recovery from the economic downslide caused by the pandemic.
Vaccination programs are being distributed, and adolescents with mild health issues or comorbidities are now getting inoculated. Giving them only a mild health impact from the Omicron variant gives the government the confidence to lower the restrictions in the year's first quarter. As a result, the activities and the expanded operation of private businesses resumed and caused the unemployment rate to fall down nearly to the unemployment rate during the pre-pandemic season, with a percentage of 6.0% in May coming from 7.7% during the pandemic.
Based on forecasts, the GDP growth of the Philippines seems faster than what is expected because of the activities being resumed, which gives more employment opportunities. Still, the inflation rate will not be left behind, which is not a good scenario. According to the forecast, the inflation rate will increase by 4.9% to 4.3% in the years 2022 and 2023, respectively, due to global commodity prices. These projections are higher than the ADB's previous projection of 4.2% in 2022 and 3.5% for 2023.
With the projections and forecasts, the eye of the government on public spending is expected to prioritize the infrastructure projects under the program of the previous administration, "build build build." The projects that ADB is financing are the Malolos Clark Railway Project and South Commuter Railway Project. Both projects are part of the North to South commuter railway system that aims to provide safe and hassle-free transportation linking Metro Manila to provinces in Northern and Sothern Luzon.
Another project funded by ADB is the EDSA Greenways project, which is to improve the experience of pedestrians along the main EDSA. Together with the said project is the Metro Manila Bridges Project, which aims to give a solution to the traffic congestion being experienced in the city.
Despite the faster GDP growth being projected, scarring has been the largest in the country as the produced output will still remain below the pre-Covid trend. In 2020 the Philippines slid into a recession by 9.6%. This is due to the restrictions being implemented by the government to slow down the spreading of the Covid-19 virus, together with it is the economy being immobile. As the restrictions were loose and activities were resumed, the Philippines emerged with a growth of 5.7% in GDP in the year 2021, and carrying this momentum, 2022 GDP growth reached 6.5%.
The Philippine economy growth and the GDP projection tied with Vietnam being the highest in Southeast Asia. It is also seated above the 5% of ADB's growth forecast for Southeast Asia, which has increased from 4.9%.
The ADB also pinpointed that the mobility data shows recreation activities and work are currently at a pre-pandemic level, while on the other hand, indicators of the private sectors, mainly manufacturing, industrial production, and imports, are continuously expanding.
But the country may face risks in the growth of the Philippine economy in the second half of 2022. These are sharper-than-expected slowdowns in major industrial economies, the possibility of elevated global commodity prices being sustained, and the financial conditions being tighter as per ADB. But despite these said factors, the projection of GDP growth for 2022 is still at 6.3%. Although it falls behind the previous forecast of 6.5 to 8%, it is still the second highest in Southeast Asia, next to Vietnam at a 6.7% GDP growth projection for 2023.
The ADB also increased its forecast regarding the average inflation for the Philippines. The previous April report shows that it would be at 4.2%, but it is now at 4.9%. This ADB inflation forecast is below the Bangko Sentral ng Pilipinas forecast, which is a 5% average inflation for this year.
GDP consists of different sectors, where services are the most significant contributing 57% of the Philippine economy's total GDP. Within services, the most important segments are trade, repair of motor vehicles and household goods, giving 17 percent of total GDP, real estate, renting and business activities which provide a total of 11 percent, then there is transport, storage and communication that contributes by 8 percent, it also has financial services which give 7 percent and also part of the services are public administration, defense and social security is the 4 percent. The 31 percent of GDP comes from Industry accounts, where manufacturing and construction are the most important, with manufacturing being 22 percent of the total GDP and construction at 5 percent. Agriculture gives the remaining 12 percent.
With the restrictions being lifted and all the activities businesses operating again, it opens up employment. It has the possibility for the GDP to grow more than what is projected. Having this growth in GDP while the inflation rate catches up, more investments would be a big help to keep the economy of the Philippines healthy.
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