Trouble in China seen slowing down PH growth in 2022
MANILA, Philippines — A slowing Chinese economy would add to high inflation as another obstacle to the Philippines’ recovery going full steam ahead this year, UK-based think tank Oxford Economics said.
“Looking ahead, we expect growth to remain robust, but external headwinds are mounting. Recent lockdowns in China will cloud the outlook for goods exports as China is one of the Philippines’ main trading partners,” Oxford Economics assistant economist Makoto Tsuchiya said in a report last week, after the government reported the stronger-than-expected first-quarter gross domestic product (GDP) growth of 8.3 percent.
In particular, “China’s growth slowdown will lead to lower demand for the Philippines’ exports and worsen the global supply chain disruptions,” Tsuchiya said.
“Related supply chain disruptions could be damaging to the manufacturing sector, which accounts for about 20 percent of GDP,” Tsuchiya noted in an earlier email to the Inquirer.
The latest government data showed that from January to March 2022, China was the Philippines’ second-biggest export destination, next only to the United States. Sales of Philippine-made goods to mainland China amounted to $2.88 billion in the first quarter, up 12.3 percent year-on-year.
China was also the Philippines’ top source of imports with a larger $6.1-billion worth or nearly a fifth of the three-month total, although 2.9-percent smaller than a year ago. As such, China remained the Philippines’ top trading partner during the first three months.
Stringent lockdowns
While China had been able to contain COVID-19 at the start of the pandemic, it was currently struggling and recently reverted many major cities and ports to stringent lockdowns under its “zero-COVID” policy.
Besides the spillover impact of China’s economic slowdown, Tsuchiya said that “domestically, higher inflation will squeeze real income and weigh on household spending.” April headline inflation surged to a 40-month high of 4.9 percent year-on-year due to expensive food and fuel, and the Bangko Sentral ng Pilipinas (BSP) xpects the rate of increase in prices of basic commodities to average 4.3 percent this year—above the 2 to 4 percent target range of manageable price hikes conducive to economic growth.
Despite these twin challenges, Tsuchiya said that “further reopening of the economy will bolster sentiment and support growth this year, while the resumption of international tourism will bolster service exports.”
As such, Tsuchiya said Oxford Economics would hike its full-year 2022 GDP growth forecast for the Philippines, from 6.7 percent previously, which was below the government’s 7 to 9 percent goal.
—BEN O. DE VERA
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