Global travel reopening crucial in Philippines economic growth in 2022

MANILA, Philippines — The Philippines needs to gradually reopen international travel and tourism in the country if it wants to ensure a stronger economic recovery by 2022.

In its weekly economic preview, market intelligence firm IHS Markit said strong economic expansion is expected in most Southeast Asian nations except Myanmar by 2022.

IHS Markit Asia Pacific chief economist Rajiv Biswas noted that the Philippines and the rest of the economies in the region managed to accelerate COVID-19 vaccination that helped in curbing rising cases amid new variants.

The Philippine economy also managed to grow 7.1 percent in the third quarter even with the surge due to the Delta variant.

“Growth momentum is expected to be supported by strong expansion of domestic demand as the impact of the pandemic is gradually mitigated by high vaccination rates and new medical treatments,” Biswas said.

Generally, the outlook for 2022 remains positive, underpinned by hopes of greater international and domestic demand in the year ahead.

“The gradual reopening of international travel will be particularly important for nations with large tourism sectors, such as Thailand, Philippines, Singapore and Malaysia,” Biswas said.

Before COVID-19, tourism accounted for nearly 13 percent of the country’s gross domestic product. But since last year, the sector has been hit the hardest as borders were closed to avert further spread of the virus.

International tourism spending in the Philippines was estimated at P549 billion.

It should be noted that the government has already ramped up efforts to boost international travel in the country, but the emergence of the Omicron variant earlier this month resulted in the renewed restrictions from high-risk areas again.

Apart from tourism, IHS Markit emphasized that the rebound in industrial production is expected to help ease supply chain disruptions caused by the recent COVID-19 waves.

The country’s manufacturing sector remained in expansion mode in November, hitting an eight-month high as the country continues to rebound from the Delta wave and as looser mobility curbs persist.

However, even as industrial production rebounds, IHS Markit warned the process of normalizing production levels and catching up with backlogs of new orders is likely to be gradual.

Despite the economic rebound expected in 2022, Biswas argued that many economies in the region will face the medium-term challenge of fiscal consolidation.

This reflects the high levels of government expenditure in the last two years resulting in soaring government debt. The Philippines, for one, hit a record high P11.97 trillion outstanding debt as of end-October.

“The process of economic recovery across industry sectors is expected to be uneven, reflecting the legacy effects of almost two years of severe economic disruption due to the COVID-19 pandemic,” Biswas said.

Still, Southeast Asia remains one of the three main growth engines in the Asia Pacific region over the next decade.