The results are finally in. The economy of the Philippines grew by 5.6% for the year 2023 and this was short of the government’s own declared target of 6% to 7%, according to a GMA Network news report.
To put things in perspective, posted below is an excerpt from the GMA news report. Some parts in boldface…
The Philippine economy grew slower at 5.6% in year 2023, falling short of the government’s target as elevated interest rates resulting from high inflation environment dampened consumption, according to data released by the Philippine Statistics Authority (PSA) on Wednesday.
The economy, as measured by gross domestic product (GDP) or the total value of goods and services produced in a period, grew by 5.6% from October to December 2023, PSA chief and National Statistician Claire Dennis Mapa said at a press conference.
This is slower than the 7.1% growth rate seen in the fourth quarter of 2022. It is also a deceleration from the upwardly revised third quarter 2023 GDP growth rate of 6%.
The fourth quarter economic performance brought the full-year 2023 economic growth rate to 5.6%, slower than the 7.6% full-year 2022 GDP growth.
This is below the government’s target range of 6% to 7% for 2023’s full-year GDP growth.
“While this growth is below our target of 6 to 7% for this year, this keeps us in the position of being one of the best-performing economies in Asia,” National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said during the press briefing.
Comparing the growth rates of neighbors in the region, the Marcos administration’s chief economist said the Philippines’ fourth quarter growth surpassed that of China (5.2%) and Malaysia (3.4%) while falling behind Vietnam (6.7%).
“More importantly, our full-year GDP for 2023 is now 8.6% higher than pre-pandemic levels,” Balisacan said.
High inflation, interest rates – The NEDA chief said the slowdown seen in 2023 could be attributed “possibly to effects of past interest rate increases.”
The Bangko Sentral ng Pilipinas’ policy-setting Monetary Board has raised the benchmark interest rate by 450 basis points since May 2022 to temper inflation, which resulted from global supply disruptions and economic uncertainty following Russia’s full-scale attack and invasion of Ukraine since February 2022.
Notably, the Philippines’ full-year inflation — which measures the rate of increase in the prices of goods and services — accelerated to 6% from 5.8% in 2022.
“The impact of inflation is on Household final consumption expenditure. We saw the impact on food expenditure… directly affected by inflation,” Mapa said.
Spending on food for the whole year grew at 8.1%, slower than 12.4% in 2022.
“We are concerned about the low growth in real spending on food due to high food prices, though it has moderated in recent months,” Balisacan said.
Meanwhile, household final consumption expenditure decelerated to 5.3% from 7% in the previous quarter in 2022.
For the whole year, household spending slowed down to 5.6% from 8.3% in 2022.
“The government will be relentless in managing inflation, especially for basic commodities such as food. Our efforts include improving the efficiency and building resiliency of the agriculture value chain, utilizing strategic trade policy when domestic production is inadequate, and establishing mechanisms to empower consumers to exercise their market power to combat inflation,” Balisacan said.
Likewise, government final consumption expenditure contracted by 1.8% in the fourth quarter, from 3.3% growth in the same period in 2022.
Full year, government spending grew 0.4%, slower than the 4.9% growth in 2022.
Balisacan said the decline in state spending last year was “largely due to the fiscal consolidation program.”
Let me end this piece by asking you readers: What is your reaction to this recent development? Do you think 2024 will be a better year of growth for the Philippine economy? Do you think more government spending will boost economic growth without adding much to inflation?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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