Phl to lead Asean in growth this year

The Philippines is projected to be the fastest-growing economy in Southeast Asia this year, according to the Association of Southeast Asian Nations Plus 3 (ASEAN+3) Macroeconomic Research Office (AMRO).

The January Quarterly Update of the AMRO’s ASEAN+3 Regional Economic Outlook released last week showed the Philippines is expected to grow by 6.3 percent this year from an estimated growth of 5.6 percent last year.

These forecasts are the same as those provided by the AMRO in its Annual Consultation Report on the Philippines released in November.

AMRO’s growth forecast for the Philippines for this year is the highest in Southeast Asia, placing the country ahead of Cambodia, which is expected to grow 6.2 percent, Vietnam at six percent, Indonesia at 5.2 percent, Malaysia at five percent, Lao People’s Democratic Republic at 4.7 percent, Thailand at 3.3 percent, Myanmar at 3.2 percent, Singapore at 2.6 percent, and Brunei Darussalam at 2.4 percent.

While the Philippines is expected to post the highest growth in Southeast Asia this year, the growth is below the government’s revised 2024 growth goal of 6.5 to 7.5 percent.

AMRO’s growth estimate for the Philippines for 2023 is also lower than the six to seven percent growth target set by the government last year.

“The Philippine economy has actually held up very well despite the high inflation and high interest rates, and it’s much less dependent on exports than other countries in the region. Nevertheless, it is still affected by the weak export last year,” AMRO chief economist Hoe Ee Khor said in a briefing.

He said the country’s economic growth in the fourth quarter, however, could have been weaker as interest rates are relatively high.

The Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate steady at 6.50 percent during its last policy meeting last year.

The economy grew at a faster pace of 5.9 percent in the third quarter last year compared with the 4.3 percent expansion in the second quarter. This brought growth in the January to September period to 5.5 percent.

Khor said there is a need to keep interest rates relatively tight until inflation is within the government’s target.

While inflation decelerated to 3.9 percent in December, the country’s average inflation rate for 2023 was at six percent, higher than the 5.8 percent in 2022, and above the BSP’s two to four percent target.

AMRO expects the country’s inflation rate to ease to 3.6 percent this year.

“If the Fed starts to cut rates by the middle of this year, there may be scope for the Philippines also to do likewise,” Khor said.

“But as long as the economy is doing strongly, we don’t see the urgency for BSP to cut rates,” he said further.

As for the regional outlook, AMRO expects ASEAN to grow at a faster pace of 4.9 percent this year from an estimated 4.3 percent growth in 2023.

AMRO also believes ASEAN+3, which covers the ASEAN, China, Hong Kong, Japan and South Korea, is poised for higher growth this year at 4.5 percent from the 4.4 percent growth estimate for 2023.

Khor said ASEAN+3’s growth is expected to strengthen this year due to resilient domestic demand and an increase in exports.

“Spiking global commodity prices remain the key risk to growth, but there are several other wildcards. We still cannot rule out a US recession,” he said.

He said the lead-up to the US election in late 2024 could also exacerbate policy uncertainty and volatility in financial markets.

In addition, he said there are perennial risks to growth such as climate change, cyber attacks and pandemics.

“It’s still there and we need to be mindful of those risks,” he said.