Election season, continued recovery to drive economic growth in 2022

COMING from a rollercoaster ride in 2021 due to a Delta-fueled second wave of Covid-19 infections and a catastrophic Typhoon Odette in the latter part of December, business leaders in Cebu are still “hopeful for a better 2022 despite risks on the horizon.”

Steven Yu, president of the Mandaue Chamber of Commerce and Industry, said the business community expects six to eight percent growth this year to be fueled by increased consumer spending during the May 2022 election season.

“We look at the year 2022 with a lot of hope and some uncertainties,” said Yu.

The Asian Development Bank raised its 2022 gross domestic product (GDP) projections at six percent from the earlier 5.5 percent.

ADB country director Kelly Bird said the Philippine economy has shown “impressive resilience.”

He said “public spending on infrastructure and continued vaccination of the population will help the country accelerate recovery in 2022.”

In the recent Development Budget Coordination Committee (DBCC) meeting, the country’s economic managers expressed optimism that the country’s GDP would “return to its pre-pandemic level by 2022.”

It kept the GDP targets at seven to nine percent for 2022 and six to seven percent for 2023 and 2024.

The DBCC also said inflation would hit two to four percent from 2022 to 2024.

Assumption for the price of Dubai crude oil per barrel, on the other hand, was revised upwards to $60 to $80 per barrel from 2022 to 2024, mainly due to the optimistic demand outlook for oil as the global economy gradually rebounds in the medium-term.

May elections

Rey Calooy, chairman of the Filipino-Cebuano Business Club Inc. (FCBI), said the upcoming election fever will make businesses vibrant in 2022.

Election-related businesses such as printing and advertising, among others will surely flourish during the season.

FCBI, which represents the micro, small and medium enterprises (MSMEs), also anchored its hope for this year on the ramped-up vaccination drive to counter Covid-19 threats. The group expects that as the country is moving closer to achieving herd immunity, this would result in quicker economic recovery.

Calooy also attributed the group’s optimism this year to the new set of leaders that will be elected this May.

“We will have a new elected president that will bring more hope in the business community,” he said.

According to reports, Bangko Sentral ng Pilipinas Gov. Benjamin Diokno said the “bump” to GDP from spending for the May 2022 national elections is seen at 0.50 percent.

Previous elections have contributed one percent to total GDP.

Diokno expects that the election this year would not be as expensive as the previous ones due to efforts to contain the pandemic.

But economists expect government spending, especially on infrastructure, to increase before the election spending ban.

Year that was

Cebu’s economy was on track for a somewhat speedy recovery in 2021 until the Delta-fueled second wave and catastrophic Typhoon Odette stunned the economic recovery of the province.

“Our recovery from the coronavirus in terms of mobility will continue; however, recovery from economic losses (caused by Typhoon Odette) is certainly set back and delayed much further,” said Yu.

Compared to 2020, the year 2021, according to Yu, was economically more challenging.

“It is a year of slump in purchasing power, decreased velocity of money and, quite unexpectedly, high inflation especially in the US,” he said.

Yu also noted a short supply in some items like semiconductors which impacted the supply of cars and electronic items, and quite surprisingly, freight containers too are in short supply.

“Costs were rising for businesses, and the market slowed down further due to lesser financial capacity of the consumers,” he said.

Calooy, on the other hand, said MSMEs’ brick and mortar businesses were outperformed by e-commerce sites or online marketplaces.

But while competition in retail became more intense, Yu said traditional brick-and-mortar businesses have adapted to the new normal or an altered normal to stay in business. Consumer and business activities had better adapted to the pandemic.

2021 was also a year when Covid-19 vaccines were rolled out and new Covid-19 cases have dropped significantly.

“Overall, the community has accepted the impact of the pandemic. They are moving forward with caution and also hope, despite the continued unfavorable business climate in majority of the sectors. They are glad to be alive, and for many, they are still about to start picking up the pieces of their battered livelihoods,” Yu said.

Opportunities

In the year 2022, business leaders continue to see abundant opportunities.

Besides the heightened election-induced consumer spending, Yu said more foreign direct investments and fund inflows related to the elections will enter the country. Return of international air travel, more mobility and lower inflation are also expected this year.

Alfred Reyes, president of the Hotel, Resort and Restaurant Association of Cebu, said the hospitality industry will see big action beginning 2023 and beyond.

“Busy activities in 2022 will not return until the full travel is back,” he said. But he noted that this year’s performance will determine the fate of the industry moving forward.

However, it is feared that Typhoon Odette’s wrath may derail the “full recovery” of the sector as billions worth of tourism properties were bulldozed whose rehabilitation may take a while.

Retailer Robert Go, on the other hand, said industry players are hoping retail sales would experience unhampered growth in this brand-new year coming from a yo-yo performance in 2021.

“Our outlook is optimistic but guarded, since Covid-19 Omicron and other variants might wreak havoc. We expect slow investment to trickle only with the help of election spending,” said Go, spokesman of the Philippine Retail Association-Cebu.

Meanwhile urban farming, e-commerce, co-working spaces, cloud kitchen, hybrid events, and agriculture, among others will dominate businesses this year, according to Calooy.

However, they also warned of risks that may negatively impact the rosy outlook for the year. These include the possible surfacing of a new Covid-19 variant and other mutations; increase in interest rates; uncertainties related to the election; threat of escalation of violence/war in Taiwan, North Korea and Ukraine; financial collapse of China’s real estate firms; and cybersecurity issues. (KOC)