GDP grew 8.3% in Q1 2022

PHILIPPINES - In Brief 12 May 2022 by Romeo Bernardo

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Despite the Omicron-driven surge in covid-19 cases at the start of the year, economic growth in Q1 was stronger than the median analyst forecast of 6.7%.The 8.3% yoy headline number reflects some base effects, but economic growth on a sequential seasonally-adjusted basis was at a robust 1.9% clip. Economic managers traced sustained GDP growth to the more relaxed restrictions on activity and mobility in the latter part of the quarter, with election-related spending helping to drive up domestic demand. The quarterly recovery is most evident in household consumption which grew 3.2% qoq (10.1% yoy), a strong performance even for election years. Continuing buildup in inventories also helped raise investments by 20% yoy despite the start of the election ban on public works that led to a 4.9% yoy contraction in government construction. Demand side growth was also weighed down by a wider trade gap, equivalent to 11.6% of GDP vs. 9.5% of GDP in Q1 last year. Production accounts show robust growth in industry (2% qoq), due largely to manufacturing, and services (2.2% qoq), where growth is more broadly distributed. Based on Q1 performance and continuing relaxed public health conditions, government’s lower-end 7% growth target does not appear implausible, especially if tourist arrivals increase and the new administration is able to further expand in-person schooling. Too, reduced odds of an antagonistic successor administration stalling public investments alongside increased likelihood of covid-19 becoming endemic bode well for economic growth. On the other hand, there are many more threats clouding the outlook, including the less favorable global economic and financial environmen...