MANILA, Philippines, January 24 ------ The Philippine economy grew at a faster rate last year with the further lifting of strict COVID-19 quarantine and lockdown protocols, a survey of leading bank economists showed.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the country’s gross domestic product (GDP) grew by 7.8 percent last year after expanding by eight percent in the fourth quarter. This is well above the 6.5 to 7.5 percent growth target penned by economic managers via the Cabinet-level Development Budget Coordination Committee (DBCC) for 2022. The Philippines exited the pandemic-induced recession with a GDP growth of 5.7 percent in 2021 following a 9.6 percent contraction in 2020 as the economy stalled due to the COVID-19 lockdowns.
“Philippine GDP growth estimate for 2023 could normalize to around six to 6.5 percent in 2023 and beyond with the stabilization of the GDP base (with no more lockdowns in 2022),” Ricafort said. Ricafort said the lower individual income tax rates for most income brackets starting January would lead to increased consumer spending, faster economic growth, and help ease the adverse effects of higher prices and inflation. In addition, Ricafort said measures to reopen the economy towards greater normalcy led to increased sales, earnings, and employment, overshadowing the risks of higher interest rates amid aggressive rate hikes delivered by the US Federal Reserve as well as the Bangko Sentral ng Pilipinas (BSP).
The chief economist of the Yuchengco-led RCBC also cited the weakening of the peso by as much as 15.7 percent to an all-time low of 59 to $1 in October before bouncing back to the 54 to $1 handle recently. ING Bank senior economist Nicholas Mapa said the economy grew at a faster rate of 7.7 percent last year after expanding by 7.5 percent between October and December. “A heavy dose of revenge spending likely lifted the overall growth number with holiday spending supercharged for the first Christmas celebration post lockdowns,” Mapa said.
However, Mapa said 2023 appears to be a challenging one as the triple threat of sticky inflation, elevated borrowing costs and high government debt all weigh on growth prospects. “The 6.5 percent official target and the seven percent unofficial target of the President will be a tall order as the odds are stacked against the Philippines, all the more with the global economy expected to face a recession,” Mapa warned.
China Bank chief economist Domini Velasquez sees GDP growth averaging 7.5 percent in 2022 after slowing down to 6.9 percent in the fourth quarter due to the impact of typhoons and higher input costs to the agriculture sector. “For full year 2022, the country’s GDP likely hit 7.5 percent, the higher end of the government’s target. Better-than-expected performance in Q3 lifted the full year print. Momentum from economic re-opening, pent-up demand after two years of lockdowns, and election spending contributed to 2022’s growth.
For this year, the chief economist of the Sy-led bank sees the GDP growth slowing down sharply to around 5.8 percent as demand momentum dissipates. “Persistently high inflation in 2022 will likely reduce consumption. High interest rates will also be a deterrence to business expansion. However, recent Chinese re-opening will be a tailwind for this year, providing much needed boost against recessions in advanced economies,” Velasquez said.
Alvin Arogo, economist at Philippine National Bank, said the country’s GDP grew by 7.5 percent in 2022 after a slower 6.8 percent expansion in the fourth quarter as consumption boost from revenge spending continued and outweighed the negative impact of high inflation on consumer demand. For 2023, Lucio Tan’s PNB sees a slower expansion of 5.5 percent as high inflation would drag consumers’ purchasing power, dampen capital formation, and the minimal increase in government expenditures.
Security Bank chief economist Robert Dan Roces said the GDP grew by 7.5 percent to P19.9 trillion last year from P18.5 trillion in 2020. “I guess the question is, will these be sustainable this 2023? Lagged hike effects, elevated inflation in the first half, a global slowdown that could slow remittances a bit, and consumers scrimping will be dampeners to growth. But given intact economic fundamentals due to sustained economic reopening, there is no stagflation nor recession scenarios expected in 2023 for the Philippines,” Roces said.
According to Roces, the BSP Monetary Board may end its rate cycle soon, which will provide some market stability as it turns towards growth support with inflation trending lower and within target by 2H23,” Roces added. The central bank raised key policy rates by 350 basis points last year that brought the benchmark interest rate to a 14-year high of 5.50 percent from an all-time low of two percent. Security Bank expects a GDP growth of 6.3 percent this year as private consumption would remain the engine of growth, albeit at a slower pace.
UnionBank chief economist Ruben Carlo Asuncion said the GDP finished strong at 7.4 percent last year despite the slower 6.5 percent expansion in the fourth quarter. “We expect GDP growth in 2023 to average at six percent. We think that, while buoyant 2022 GDP growth bodes well for 2023’s prospects, event risks and other policy developments lead us to be extra cautious this year,” Asuncion said.
The DBCC sees a slower GDP growth of between six and seven percent for 2023.