Economy grew by 5.6% in 2023
Gov’t misses target due to inflation, interest rate drag
The Philippine economy expanded at a slower pace in 2023 than the previous year, falling below the government’s growth target amid high inflation and interest rates that affected consumption.
National Statistician Dennis Mapa said in a press briefing yesterday that the country’s gross domestic product (GDP) posted 5.6 percent growth last year, lower than the 7.6 percent expansion in 2022.
He said the full-year 2023 GDP growth is the lowest since 2011, excluding the contraction posted during the pandemic.
Last year’s GDP growth also fell short of the six to seven percent growth the government was aiming for.
In the fourth quarter of last year, the economy posted 5.6 percent growth, also slower than the 7.1 percent recorded in the same quarter of 2022 and the revised six percent growth in the third quarter of last year.
“While this growth is below our target of six to seven percent for this year, this keeps us in the position of being one of the best-performing economies in Asia,” National Economic and Development Authority Secretary Arsenio Balisacan said.
Among those that have already released their fourth quarter GDP growth figures, he said the Philippines has the second fastest growth next to Vietnam (6.7 percent), and surpassed China (5.2 percent) and Malaysia (3.4 percent).
“More importantly, our full-year GDP for 2023 is now 8.6 percent higher than pre-pandemic levels,” he said, adding that the fourth quarter economic performance validates the strategies under the country’s overall development blueprint or the Philippine Development Plan 2023 to 2028.
Household spending grew faster in the fourth quarter of 2023 at 5.3 percent versus the 5.1 percent growth in the previous quarter, but slower than the seven percent growth in the fourth quarter of 2022.
Household spending grew by 5.6 percent last year, a slowdown from the 8.3 percent growth in 2022.
Balisacan said the “slowing down is possibly the effect of past increases in interest rates,” which take time before they are felt.
He also cited inflation, which tends to affect household consumption quickly.
To tame inflation, the Bangko Sentral ng Pilipinas (BSP) has hiked key policy rates by 450 basis points since May 2022.
Inflation averaged six percent last year, higher than the 5.8 percent 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.
As such, he said the government would be relentless in managing inflation, especially for basic commodities such as food, with efforts to include improving the efficiency and building the 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.
Government spending contracted by 1.8 percent in the fourth quarter of last year from the previous quarter’s 6.7 percent growth, bringing the full-year growth in government spending at 0.4 percent, a slowdown from the 4.9 percent growth in 2022.
Balisacan attributed the slowdown largely to the fiscal consolidation program.
“Recall that in 2022, a lot of government resources was spent on the vaccination program, on top of the elections held in May,” he said.
He said the government would continue to implement measures started in the third quarter of 2023 to improve program implementation.
The weak global economy also affected the country’s growth performance as it weighed down heavily on the export sector, which declined by 2.6 percent in the
fourth quarter due to the deep contraction in goods exports at 11.6 percent.
For now, Balisacan said the government is sticking to the 6.5 to 7.5 percent growth target for this year.
Given the new GDP data, he said the Development Budget Coordination Committee, which reviews and approves the macroeconomic targets, will be meeting soon to reassess its programs and assumptions.
“But the way we see it, I don’t think that giving up your ambition this early it’s only the first (quarter) of the year and now you want to say reduce your 6.5 (percent target), that’s too defeatist. I think that we need to work harder and we think that we are motivated enough to achieve these, these goals that we as a people have posted,” he said.
Despite threats to growth like El Niño and external headwinds like geopolitical tensions, he said the economy has strengths that can be maximized.
“We have already put in place and our government agencies are working hard to address the measures, to put in the measures needed to mitigate the impact of El Niño not only on agriculture, but on the social sector,” he said.
When asked to comment on how domestic political risks can affect the economy amid the rift between President Marcos and former president Rodrigo Duterte, Balisacan said “any country that has political instability will hurt its economy.”
Whether it’s the Philippines or Thailand or Vietnam, he said the aim is to ensure stability is maintained because it determines major decisions in relation to investment.
Commenting on the GDP result, ING senior economist Nicholas Mapa said that should current trends continue, economic growth should hit 5.4 percent, driven by robust but moderating household spending.
“Given our expectation that revenge spending is indeed winding down, we could see household spending capped as consumers work to pay off debt built up over the past two years,” he said.