gross domestic product (GDP) – Page 7

Philippines achieves 5.7% economic growth in 1st quarter of 2024

May 23, 2024May 9, 2024carlocarrasco

Recently it was confirmed that the economy of the Philippines grew by 5.7% in the first quarter of 2024 which is noticeably lower than what was achieved in the same time period a year ago, according to a Philippine News Agency (PNA) news article.

To put things in perspective, posted below is an excerpt from the PNA news article. Some parts in boldface…

The Philippine economy grew by 5.7 percent in the first quarter of the year, surpassing other major economies in the region.

In a briefing on Thursday, National Statistician Dennis Mapa said the economic growth during the quarter was higher than the 5.5 percent seen in the last quarter of 2023.

Mapa said, however, it was lower than the 6.4 percent economic growth seen in the first quarter of last year.

National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan noted that the Philippine economy continues to demonstrate resilience and growth despite the domestic and external headwinds.

“Despite our challenges on both domestic and international fronts, our economy continues to demonstrate remarkable resilience and growth. This performance retains the country’s position as a leading force among Asia’s emerging economies,” he said.

Balisacan said the first quarter Philippine gross domestic product growth rate is about the same as Vietnam’s, and surpassed other major economies such as China at 5.3 percent, Indonesia at 5.1 percent, and Malaysia at 3.9 percent.

All major economic indicators which include agriculture, forestry, and fishing; industry; and services posted year-on-year growth in the first quarter at 0.4 percent, 5.1 percent, and 6.9 percent.

Household final consumption expenditure and government final consumption expenditure posted lower growth rates at 4.6 percent and 1.7 percent from a year ago’s 6.4 percent and 6.2 percent.

Balisacan said the slowdown in household spending was due to the elevated prices of major food items and the heat wave.

“Meanwhile, government spending also slowed down, primarily due to the sliding of a large amount of expenditure to April this year, whereas the government made such spending in March last year,” he said.

Gross capital formation also posted a lower growth of 1.3 percent from 12.8 percent last year, while imports of goods and services also slowed to 2.3 percent from 4.2 percent.

Growth of exports of goods and services, however, accelerated to 7.5 percent from 1.1 percent in the first quarter of 2023. Balisacan said the growth in exports was mainly driven by the recovery in the exports of electronics products.

Let me end this piece by asking you readers: What is your reaction to this recent development? Do you think the national economy will be able to grow at least 6% in each of the next three quarters? Is it possible that the intense summer heat will make 2nd quarter economic growth smaller?

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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DBCC revises Philippine economic growth targets for 2024 and 2025

April 17, 2024April 7, 2024carlocarrasco

As far as the Development Budget Coordination Committee (DBCC) is concerned, current domestic and global developments justified their recent revision of economic growth targets for the Philippines in 2024 and 2025, according to a Philippine News Agency (PNA) news article.

To put things in perspective, posted below is an excerpt from the PNA news article. Some parts in boldface…

The Development Budget Coordination Committee (DBCC) has adjusted its economic growth targets for 2024 and 2025 due to current domestic and global developments.

The DBCC revised downward its gross domestic product (GDP) outlook for 2024 to 6 to 7 percent from the previous range of 6.5 to 7.5 percent, Socioeconomic Planning Secretary Arsenio Balisacan said in a Palace press briefing on Thursday.

For 2025, the DBCC narrowed the GDP target to 6.5 to 7.5 percent from the previous 6.5 to 8 percent. Balisacan said the growth projection of 6.5 to 8 percent for 2026 to 2028 was retained.

The revised targets growth targets were initially discussed during the DBCC’s 187th meeting on March 22.

The DBCC took into consideration the latest trade outlook of the Bangko Sentral ng Pilipinas (BSP) and the International Monetary Fund (IMF) amid global trade disruptions and geopolitical tensions.

President Ferdinand R. Marcos Jr. approved the latest GDP outlook when he presided over the 16th full Cabinet meeting at Malacañan Palace in Manila on Wednesday.

Balisacan said the Marcos administration remains steadfast in its commitment to sustaining the robust growth trajectory of the Philippine economy.

“Robust macroeconomic fundamentals will support this growth trajectory. These growth targets will sustain the country’s position as one of the fastest-growing emerging economies in the Asia Pacific region,” Balisacan said.

“The government’s dedication transcends meeting statistical targets or numerical benchmarks. We direct our efforts toward realizing a strategic and compelling vision for our nation’s prosperity even as we navigate a global economic landscape marked by various challenges within and without,” he added.

Balisacan also assured the public that the government is still on track to achieving the upper middle income status by 2025.

Opportunities and risks – Balisacan said the country’s economic team discussed the possible opportunities and risk to growth outlook, adding that it identified several domestic and external challenges that are “on the horizon.”

These include climate change and extreme natural disasters such as El Niño that would “continue to pose risks to food security and the stability of food prices,” he said.

“Additionally, risks related to inflation, such as potential adjustments in transport fares, wages, and service utility fees higher than expected, could dampen household consumption,” he said.

Balisacan also cited that global economic slowdown may weaken external demand, while increasing geopolitical and trade tensions could disrupt supply chains.

He added that general elections in major economies could lead to political shifts that may disrupt trade and investment.

“Despite the anticipated risks, we remain optimistic about the country’s sustained growth momentum as we strive for better development outcomes. We aspire to position the Philippines as a frontrunner within our region and beyond—a beacon of inclusive progress and resilience,” Balisacan said.

Let me end this piece by asking you readers: What is your reaction to this recent development? Do you think the economy of the Philippines will end up growing at a lower-than-expected pace?

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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Fitch sees Philippine economy outpacing Southeast Asian economies this year with 6.4% growth

March 25, 2024March 15, 2024carlocarrasco

Financial firm Fitch Ratings expects the economy of the Philippines to grow the fastest among Southeast Asian economies this year with a growth rate of 6.4%, according to a news article by BusinessWorld.

To put things in perspective, posted below is an excerpt from the BusinessWorld news report. Some parts in boldface…

THE PHILIPPINES is expected to be the fastest-growing economy in Southeast Asia this year, according to Fitch Ratings.

Data from Fitch Ratings’ Asia-Pacific Sovereigns Credit Outlook for February showed that the Philippines’ gross domestic product (GDP) is projected to expand by 6.4% this year.

This will be the fastest growth in Southeast Asia, ahead of Vietnam (6.3%), Indonesia (5%), Malaysia (4.2%), Thailand (3.8%) and Singapore (2.3%).

Krisjanis Krustins, Fitch Ratings’ primary sovereign analyst for the Philippines, said Philippine GDP growth would likely remain above 6% in the next few years.

“We forecast real GDP growth of above 6% over the medium term, considerably stronger than the ‘BBB’ median of 3%, supported by large investments in infrastructure and reforms to foster trade and investment, including through public-private partnerships (PPPs),” he said in an earlier commentary.

Fitch Ratings’ forecast is slightly below the government’s 6.5-7.5% target this year.

The Philippine economy grew by 5.6% in 2023, slower than 7.6% in 2022 and fell short of the government’s 6-7% full-year target.

Economic managers have said they might revise growth assumptions and targets to be more “realistic” and account for global economic conditions.

The Philippine Statistics Authority (PSA) is set to release first-quarter GDP data on May 9.

For 2025, Fitch expects Philippine economic output to expand by 6.5%. This also makes it the fastest-growing economy in the region next year, alongside Vietnam. It will be ahead of Indonesia (5.2%), Malaysia (4.5%), Thailand (3.4%) and Singapore (3%).

In November, Fitch Ratings affirmed the Philippines’ “BBB” investment grade rating and kept its “stable” outlook.

A “BBB” rating indicates low default risk and reflects the economy’s adequate capacity to pay debt. A “stable” outlook on the rating also means it is likely to be maintained over the next 18-24 months.

Let me end this piece by asking you readers: What is your reaction about this recent development? Do you think Fitch’s predictions for the Philippine economy will turn out true by the end of 2024?

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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Dutch bank predicts Philippine economy will grow 5.4% this year

March 8, 2024February 28, 2024carlocarrasco

ING, a bank and financial services firm based in the Netherlands, published its forecast that the economy of the Philippines will grow by 5.4% this year, according to a Manila Bulletin news report.

To put things in perspective, posted below is an excerpt from the Manila Bulletin news report. Some parts in boldface…

Dutch bank ING is projecting a moderate 5.4 percent growth for the Philippines this year, saying the impact of the central bank’s rate hikes could have propelled robust growth but it is handicapped by “soft” capital formation.

The 5.4 percent growth estimate is considerably lower than the government target of 6.5 percent to 7.5 percent this year. It is also lower than 2023’s full-year 5.6 percent growth, which was also below the government’s goal of six percent to seven percent.

ING senior economist Nicholas Mapa, in an ING Manila’s economic briefing on Monday, Feb. 19, said domestic growth seems strong this year but “below par as handicaps persist.”

He said one of these handicaps is the lack in capital formation as an impact of the Bangko Sentral ng Pilipinas’ (BSP) cumulative rate hikes since May 2022, for a combined 450 basis points to bring the target reverse repurchase rate or the policy rate to 6.5 percent.

Because of this, Mapa said the “missing link” for a within-target growth is private investment and a National Government spending spree not hampered by a “soft” capital formation.

Capital formation is an integral part of GDP growth. However, capital formation and growth prospects were soft in 2023 due to rate hikes and it could persist this year.

For 2024, ING also forecasts inflation of three percent versus an actual six percent in 2023. The forecast is within the BSP’s target of two percent to four percent. It is also lower compared to the risk-adjusted forecast of the BSP of 3.9 percent for 2024.

Mapa also predict the exchange rate will end with a stronger peso this year at P54.90 since he also expects the BSP’s Monetary Board will cut the policy rate by 50 basis points (bps) from 6.5 percent to six percent, thereby boosting the peso performance.

Based on his presentation during the briefing, Mapa expects the first quarter GDP will perform better at six percent compared to the fourth quarter 2023 GDP of 5.6 percent. By the second quarter, he thinks the economy will grow by 6.3 percent but then will drop to 4.7 percent by the third quarter and further down to 4.5 percent in fourth quarter this year.

He said the rate hikes impact bank lending as well as GDP growth, and that the “elevated rates (has kept) capital formation subdued after years of underinvestment.”

Let me end this piece by asking you readers: What is your reaction about this recent development? Do you think ING’s prediction will turn out correct by the end of this year? Do you think that the economy of the Philippines can somehow grow by at least 6% this year?

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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Sun Life Investment Management and Trust Corporation (SLIMTC) anticipates strong Philippine economic growth for 2024

March 4, 2024February 23, 2024carlocarrasco

As far as Sun Life Investment Management and Trust Corporation (SLIMTC) is concerned, the Philippine economy can achieve strong growth this year with favorable economic factors supporting it, according to a Philippine News Agency (PNA) news article.

To put things in perspective, posted below is an excerpt from the PNA news report. Some parts in boldface…

The government’s 6.5 to 7.5 percent economic growth target for this year is attainable as the projected decline in interest rates will help boost consumption and investments, a top official of Sun Life Investment Management and Trust Corporation (SLIMTC) said on Thursday.

“It seems like it’s something that’s still attainable. Let’s see when rate cuts are there and especially when those infrastructure projects are in,” said SLIMTC Chief Investment Officer Ritchie Teo in a briefing at the Milestone Building in Bonifacio Global City in Taguig City.

According to Teo, the Bangko Sentral ng Pilipinas (BSP) is projected to cut rates by a total of 100 basis points this year as inflation continues to ease.

Headline inflation, which reached 6 percent in 2023, is projected to settle at 3.8 percent this year.

Teo said the BSP will likely wait for the US Federal Reserve to slash interest rates thus, the first rate cut is forecast to happen around June or the early part of the second half of the year.

“Probably good to say they will only cut when Fed cuts. They will wait for Fed so probably that’s on the latter part. Not in April, maybe in June or early second half,” said Teo.

SLIMTC expects the US Federal Reserve to cut policy rates by 75 to 100 basis points by mid-year as US inflation returns to target.

“They [BSP] will leave some [easing] on the latter part of the year mainly because of risks like the November election. So it’s good to have something on the table,” he added.

Teo said the lower interest rates will boost consumption and private investments, which in turn will help accelerate the country’s economic growth.

“Based on the latest gross domestic product (GDP) forecast, we anticipate 6% growth for 2024, largely driven by higher consumption and private investments,” he said.

Government spending especially on infrastructure projects is also expected to be one of the major growth drivers for this year.

“If you look into the investment side, maybe more on the government, given that they’ve been trailing but for the private investments, especially with the rate cuts, again their spending will improve because with the higher interest rates, some are really holding back,” said Teo.

Let me end this piece by asking you readers: What is your reaction about this recent development? Do you think easing inflation, lower interest rates and strong consumption will be enough to help the Philippine economy grow by at least 6% this year?

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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UBS Global Research and Evidence Lab sees Philippine GDP growing 5.7% this year

February 26, 2024February 16, 2024carlocarrasco

A research firm recently raised its forecast of the Philippine economy for 2024 predicting a gross domestic product (GDP) growth rate of 5.7% this year, according to a news report by BusinessWorld.

To put things in perspective, posted below is an excerpt from the BusinessWorld report. Some parts in boldface…

PHILIPPINE gross domestic product (GDP) may grow by 5.7% this year following the economy’s faster-than-expected expansion in the fourth quarter of 2023, UBS Global Research and Evidence Lab said.

The research firm raised its 2024 Philippine GDP growth forecast from 5.3% previously, Grace Lim, an economist from UBS, said in a note. It also hiked its 2025 projection to 6% from 5.8%.

“This largely reflects carryover effects from the fourth quarter of 2023, rather than a strong bounce in sequential growth momentum through 2024,” Ms. Lim said.

Both forecasts are below the government’s growth targets of 6.5-7.5% for this year and 6.5-8% for 2025.

The Philippine economy grew by 5.6% in the fourth quarter, bringing full-year growth to 5.6% in 2023. This was slower than the 7.6% expansion in 2022 and below the government’s 6-7% goal.

At 5.7%, economic growth this year would be faster than the 2023 pace but is still slower than the pre-pandemic average of 6.6%, Ms. Lim noted.

“On the bright side, we highlight that inflation has been trending down nicely, surprising consensus on the downside for three months in a row,” she said. “Should downside risks to inflation materialize, consumption could surprise on the upside.”

Inflation eased to 2.8% in January from 3.9% in December and 8.7% in the same month a year ago. This was the slowest print since October 2020 and marked the second straight month that inflation settled within the 2-4% target band.

Ms. Lim noted that consumer spending remained robust last year despite inflationary pressures and amid resilient labor market conditions.

In 2023, household spending grew by 5.6%, slower than 8.3% in 2022. Household consumption typically accounts for three-fourths of GDP.

Meanwhile, the unemployment rate dropped to a record low of 4.3% from the 5.4% recorded in 2022.

Let me end this piece by asking you readers: What is your reaction to this recent report? Do you think the Philippine economy will grow below the national government’s targets for 2024? Do you think UBS’ forecast of 5.7% growth will turn out correct by the end of this year?

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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Philippine economy grew by 5.6% in 2023

February 3, 2024January 31, 2024carlocarrasco

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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Philippines’ credit ratings affirmed by S&P Global Ratings

December 4, 2023November 30, 2023carlocarrasco

The credit ratings of the Philippines for both long-term and short term were affirmed by the US-based S&P Global Ratings which also saw stronger economic growth for the country in the next few years, according to a Philippine News Agency (PNA) news article.

To put things in perspective, posted below is an excerpt from the PNA news article. Some parts in boldface…

United States-based S&P Global Ratings on Wednesday affirmed the Philippines’ ‘BBB+’ long-term and ‘A-2’ short-term sovereign credit ratings, citing the country’s sustained economic recovery due to the government’s ongoing efforts to address infrastructure gaps and improvements in the business climate.

“The stable outlook reflects our expectation that the Philippine economy will maintain healthy growth rates and the fiscal performance will materially improve over the next 24 months,” S&P Global said in a report.

According to S&P, the country’s gross domestic product (GDP) is projected to grow by 5.4 percent this year, reflecting the impact of high base and the slower growth of the world economy.

The report also showed that Philippine economic growth is projected to accelerate to 5.9 percent in 2024, 6.2 percent in 2025 and 6.4 percent in (2026).

The credit rater expects that the Philippines’ economic growth will remain well above the average among its peers “due to the government’s ongoing efforts to address infrastructure gaps and improvements in the business climate through regulatory and tax reforms, which will further support expansion in economic productivity.”

It also recognized the government’s efforts to prioritize infrastructure development and fiscal measures and cited crucial reforms such as the public-private partnership (PPP) framework and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

“The Philippine government has generally enacted effective and prudent fiscal policies over the past decade. Improvements to the quality of expenditure, manageable fiscal deficits, and low general government indebtedness testify to this. This track record of sustainable public finances helped the government accumulate fiscal resources to respond to the pandemic,” the report said.

It also underscored the importance of tax reforms in ensuring that public finances remain sustainable, while infrastructure and social needs are addressed.

S&P said the general government (GG) deficit is estimated to decline and to settle at 3.8 percent of GDP in 2023, from 4.4 percent in 2022.

“We believe the fiscal shortfall will continue to narrow over the coming years while the economy regains its footing and the government scales back stimulus measures. We expect the medium-term fiscal framework (MTFF) revealed by the Marcos administration last year to guide the consolidation process,” it said.

The report also highlighted the country’s solid household and corporate balance sheets and sizable remittance inflows, and expects foreign direct investments to remain stable this year.

However, S&P said it may lower the country’s ratings if economic recovery falters, if general government debt exceeds 4 percent of GDP, if net debt stock exceeds 60 percent of GDP or if interest payments exceed 15 percent of revenue on a sustained basis.

“We may raise the ratings if the economy recovers much faster than we expect, and the government achieves more rapid fiscal consolidation,” it said.

Let me end this piece by asking you readers: What do you think about this recent development? Are you satisfied with what was accomplished this year with regards to foreign tourist arrivals and the related revenues? Do you think the Philippine economy will continue to grow stronger each year until 2026? Do you believe in the findings of S&P Global Ratings?

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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BIR targeting online sellers

March 20, 2023March 13, 2023carlocarrasco

If you have been engaging on selling items or services online, you should be aware that the Philippines’ authority on taxation the Bureau of Internal Revenue (BIR) is constantly watching you and it is seeking ways to tax you, according to a BusinessWorld news report. Already the BIR has been communicating with the e-commerce platforms.

To put things in perspective, posted below is an excerpt from the BusinessWorld news article. Some parts in boldface…

THE BUREAU of Internal Revenue (BIR) is looking to collect taxes from online sellers on e-commerce platforms more efficiently.

BIR Commissioner Romeo D. Lumagui said it is difficult to monitor taxes on individual online sellers on e-commerce platforms.

“We’re in constant communication with the platforms, because it’s a challenge to monitor. We’re thinking of ways to approach it because if we look at individual online sellers, it’s a bit difficult. It’s a challenge,” he told reporters on Thursday evening.

Mr. Lumagui said the BIR is prioritizing ways to better collect taxes from online sellers and other new platforms this year.

The pandemic forced many entrepreneurs to shift to online selling using e-commerce platforms like Shopee and Lazada, as well as social media platforms such as Facebook, Instagram and Tiktok.

As of 2022, the Department of Trade and Industry (DTI) estimated there are around two million entities doing business as online sellers.

In 2021, the digital economy contributed 9.6% to the country’s gross domestic product (GDP), or about P1.87 trillion. DigiPinas, the multi-sectoral initiative led by UBX Philippines Corp., earlier said the Philippine digital economy can grow to as much as $150 billion or about P8.3 trillion in the next decade.

Meanwhile, Mr. Lumagui said the BIR will tap social media influencers to help educate the public on the importance of paying taxes.

“They have reach and I think that one way of making people comply with tax obligations is to educate the people since tax is a very complicated topic not easy to understand,” he said, adding the BIR will schedule a dialogue with them.

Mr. Lumagui said the BIR will continue its efforts to collect taxes from social media influencers, since they’re earning income. He noted there are already some who are undergoing tax audits.

“What we want is to dialogue with them that these are your obligations as social media influencers, you’re earning from whatever you’re doing, so this is your responsibility as income earners,” he said.

The BIR said it collected around P44.6 billion worth of tax from online content creators and retail sales at the end of 2021.

Let me end this piece by asking you readers: What is your reaction to this recent development? If you have been selling products or services online for the last twelve months, do you think the BIR’s move with taxing your business will negatively affect Philippine e-commerce as a whole? Have you set aside enough money for potential taxation by the BIR? What is the one thing about online selling that made you stay away from selling through physical establishments like a store?

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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Oxford Economics says Philippine economic growth will slow down to 4.1% this year

February 28, 2023February 23, 2023carlocarrasco

For Oxford Economics, the economy of the Philippines will achieve continued growth in 2023 but with a notable slow down to 4.1%, according to a BusinessWorld news report. Oxford Economics mentioned in its statement factors like the global economy entering recession, inflation and the lack of impact from China’s reopening.

To put things in perspective, posted below is the excerpt from the BusinessWorld news article. Some parts in boldface…

PHILIPPINE ECONOMIC GROWTH is expected to slow to 4.1% this year, as external headwinds and elevated inflation are seen to dampen domestic demand, Oxford Economics said.

“After registering respectable growth of 7.6% in 2022, we expect the Philippines’ economy to slow to 4.1% amid global headwinds, elevated inflation, and a fading reopening boost. With monetary tightening set to continue, the economy could use a hand from the fiscal side, but chances are slim,” Makoto Tsuchiya, assistant economist at Oxford Economics, said in a research note released on Wednesday.

Oxford Economics’ gross domestic product (GDP) projection is well below the government’s 6-7% target.

It expects GDP to expand by 4.5% next year, still outside the 6.5-8% target set by the government.

“We expect GDP growth to slow materially amid softer external demand as the global economy enters a recession, led by weakness in major advanced economies. We don’t think China’s reopening will be enough to offset this weakness, with the recovery in private consumption there likely to be lackluster,” Mr. Tsuchiya said.

There is a widely anticipated global recession this year, with the World Bank projecting global growth to slow to 1.7%.

Rising inflation is also seen to “substantially” slow the Philippine economy, Mr. Tsuchiya said.

In January, inflation soared to a 14-year high of 8.7%, marking the 10th consecutive month inflation was above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

The central bank also raised its average inflation forecast to 6.1% this year from 4.5% previously.

Oxford Economics said that the BSP will continue to hike rates to tame inflation and keep in step with the US Federal Reserve.

“Elevated inflation means policy makers will not be able to react by lowering interest rates. Indeed, we expect tightening to continue for at least the next two meetings, albeit at a slower pace — in contrast to other Asian central banks who can afford to pause,” Mr. Tsuchiya said.

Oxford Economics also cited the lack of policy support as a factor contributing to slower growth this year.

“We think significant support is unlikely given limited policy space on both the monetary and fiscal front. Ideally, fiscal policy would take over the burden of supporting growth. But debt accumulated during the pandemic era means the focus is instead on fiscal consolidation,” Mr. Tsuchiya said, noting that the Philippine government may adopt a more restrained approach in spending.

Oxford Economics expects the budget deficit will reach 2.7% of GDP by 2028, better than the 3% projection given by the Development Budget Coordination Committee (DBCC).

The government projects the fiscal deficit to hit 6.9% of GDP or around P1.5 trillion this year. In the 11 months to November, the budget deficit shrank by 7.2% to P1.24 trillion.

However, Oxford Economics said the debt-to-GDP ratio may remain elevated at 61.1% by 2025. This is higher than the 60% target set by the government in the same period.

The country ended last year with a debt stock at 60.9%, better than the 63.7% seen in end-September but still above the 60% threshold considered manageable by multilateral lenders for developing economies.

Let me end this piece by asking you readers: What is your reaction to this recent development? Do you think Oxford Economics’ prediction about 4.1% economic growth for the Philippines this year will turn out to be true? Do you think Oxford Economics made a strong case explaining why economic growth in 2023 will be smaller for the Philippines?

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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