Phl likely missed 2023 growth target

While some economists believe the Philippine economy likely grew faster in the fourth quarter, the overall expansion in 2023 is still expected to fall short of the six to seven percent target penned by the government’s economic managers.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the country’s gross domestic product (GDP) growth likely accelerated to 6.5 percent in the fourth quarter of 2023 after picking up to 5.9 percent in the third quarter from 4.3 percent in the second quarter.

However, Ricafort said that despite the faster growth rate in the fourth quarter, the fullyear 2023 growth likely slowed to 5.8 percent compared to the previous year’s 7.6 percent expansion due to the higher borrowing costs that dampened the spending power of consumers and businesses.

“For the fourth quarter of 2023, the major economic growth drivers are the higher government spending, especially on infrastructure, the barangay election-related spending toward the end of October, as well as the continued recovery for many businesses as the economy further reopened toward greater normalcy,” he said.

Ricafort also cited higher sales as well as the remittances from overseas Filipino workers during the Christmas holiday spending season.

The Philippine Statistics Authority is set to announce the 2023 fourth quarter economic performance on Jan. 31.

UnionBank chief economist Ruben Carlo Asuncion said the economy likely grew at a faster pace of 6.1 percent in the fourth quarter from 5.9 percent in the third quarter.

“Our fourth quarter GDP growth forecast yielded a growth forecast in the range of 5.1 to 6.2 percent year-onyear. This predicted range corresponds to a seasonally adjusted, quarter-on-quarter growth of 2.1 percent to 3.2 percent,” Asuncion said.

He said the robust and resilient consumption spending was the main driver of the expected growth print in the last quarter of 2023 despite the drag of elevated interest rates arising from the BSP’s hawkish pause.

“The resumption of disinflation trend in the fourth quarter may also have contributed to a sober domestic spending sentiment. Another risk for our spot forecast for the fourth quarter GDP growth is the tempered fiscal spending that we have observed,” he said.

According to Asuncion, the national government has renewed its emphasis on budget deficit and national debt management in order to ease potential downgrade risks to the investment credit rating of the country.

Asuncion sees the 2023 GDP expansion settling at 5.7

percent.

China Bank chief economist Domini Velasquez said the economy likely expanded by 5.6 percent from October to December last year, slower than the 5.9 percent growth recorded during the July to September period.

On the supply side, she said services remained the main driver of growth, although there was a slight slowdown as above-target inflation over the past two years took a toll on consumers’ purchasing power.

“The construction industry was likely propped up by the government’s continued infrastructure push as elevated borrowing costs remained a drag on private construction activities,” she said.

Meanwhile, agricultural production in the fourth quarter likely benefited from the absence of strong typhoons.

On the demand side, Velasquez said government expenditure likely sustained its recovery as agencies used up their remaining budgets before the year ends.

In terms of trade, she said the services sector likely continued to buoy the overall growth in exports, countering the persistent decline in export income due to the weakness in global demand.

Furthermore, she pointed out that household consumption likely moderated in the fourth quarter as consumers felt the lagged effects of persistently high inflation in the past two years.

“Looking ahead, we expect the economy to fare better in 2024 due to slowing inflation, expected monetary easing in the second half of the year and higher government budget. However, we note that the economy would still have to contend with headwinds such as a global economic slowdown and heightened geopolitical tensions,” she said.

For his part, ING senior economist Nicholas Mapa said the Philippine economic growth likely slowed to 5.5 percent in the fourth quarter from 5.9 percent in the third quarter of last year.

“The country’s fourth quarter GDP should expand by 5.5 percent year-on-year, with growth fueled by robust household consumption and accompanied by a healthy dose of government expenditure. We are, however, expecting capital formation to stay subdued given elevated borrowing costs, while a stark widening of the trade deficit should result in net exports turning negative,” he said.

ING believes the 2023 economic expansion likely settled at 5.5 percent, which is decent but unfortunately below the government’s official target of six to seven percent.

“With growth slipping below the government’s target, we believe the central bank will refrain from tightening policy rates further – although BSP Governor Remolona has reiterated his preference to maintain his current hawkish stance for now,” Mapa said.

Aris Dacanay, economist for ASEAN at HSBC, said the Philippine economy may have grown by only five percent in the fourth quarter, the slowest pace since the global financial crisis.

“The Philippine economy is positioned to record the fastest growth rate in ASEAN in 2023 despite seeing the highest inflation rate in the region. All of ASEAN experienced the same global headwinds, such as trade disruptions and volatility in financial markets,” he said.

Dacanay said goods exports have also fallen by the doubledigits, suggesting that the Philippines, like elsewhere, is still exposed to a slump in global demand.

“But even at five percent year-on-year, the Philippines is expected to be one of the fastest growing economies in ASEAN in the fourth quarter 2023, with risks even tilted to the upside. Helping the Philippines buck the trend is a robust and resilient labor force,” Dacanay said.

He said unemployment rate in October shrunk to its lowest level at 3.6 percent as many residents found ways to make ends meet in the informal sector.

“With more people earning extra incomes, households were likely able to smoothen their consumption amid a challenging macroeconomic environment,” Dacanay said.

HSBC sees the GDP growth further slowing to 5.3 percent this year after slumping to 5.4 percent last year, which is far below the Philippine economy’s usual trend.

“The same headwinds will likely persist throughout 2024, but consumption will remain strong. We expect the Philippines to be the second fastest growing ASEAN economy at 5.3 percent,” Dacanay said.