Strong Exports to Boost the Economic Growth Trajectory in the Philippines
The policy normalization of the world’s central banks is expected to increase global trade that may help the Philippines improve its growth trajectory.
During the 16th JP Morgan Philippine Conference 2022, Banko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno stated that the world’s central banks’ policy normalization, together with the US Federal Reserve would give opportunities for economies like the Philippines with regards to universal trade.
Diokno expressed, “We expect the Philippine economy’s growth trajectory to improve further owing to the projected expansion of exports in 2022.”
The Philippine Statistics Authority (PSA) noted that the country’s market exports grew by 17.5% or US$74.64 billion last year, from US$65.21 billion in 2020 amid increased global trade.
Nevertheless, imports shot up by 31% or US$117.78 billion in 2021 from US$89.81 billion, reflecting the growth of economic activities due to the alleviation of COVID-19 mobility restrictions.
This interpreted a record trade shortage of US$43.13 billion last year, 75.4% broader than the US$24.6 billion in 2020.
Diokno assigned the 16% increase in exports to the recovery in demand from the Philippines’ major trading partners. The exports of electronic products held more than half of the country’s overall exports.
In addition, Diokno noted, “And we expect exports of electronic products to increase as demand for semiconductors and other electronic components rises due to more extensive global digitalization efforts across multiple sectors.”
Moreover, Diokno stated that lending support to the improved export outlook will result in higher commodity prices in mineral and agro-based products, as well as an increase in domestic production capacity.
According to Diokno, the normalization of the monetary policy in advanced economies is foreseen to cause rebalancing of global capital flows and reduction of growing markets’ currencies.
Diokno mentioned that the effect of the policy could affect all growing economies, but would be unequal on each separate economy.
Diokno cited, “Our assessment is that the Philippines is in a favorable position to navigate this tightening of global financial conditions given its manageable inflation environment and sufficient external buffers.”
The Philippines’ gross international reserves (GIR) stood at $109 billion in 2021, more than enough to cope with unfavorable external shocks.
Moreover, Diokno noted that structural flows, along with settlements from overseas Filipino workers (OFWs), business process outsourcing (BPO), and foreign direct investments (FDIs), would boost the country’s external payments position to a greater extent.
Diokno mentioned that the central bank’s market-determined exchange rate system and macroprudential course of action would continue to restrain immoderate foreign exchange irregularity and help maintain order in the financial markets.
This year, economic managers see a more rapid gross domestic product growth of 7 to 9% compared to the 5.6% last year.