Philippine growth likely to slow down in 2023 – Oxford

MANILA, Philippines — The Philippines, along with most Asian economies, is expected to post slower growth next year amid challenges such as a global economic slowdown, as well as high inflation and policy rates, according to Oxford Economics.

The UK based think tank’s research brief showed it expects Philippine gross domestic product (GDP) growth to slow to 3.3 percent next year from 6.1 percent this year.

Arup Raha, head of Asian economics at Oxford Economics, said in an email the growth outlook for the Philippines next year was downgraded from the previous forecast of four percent, “largely based on more caution about the external environment.”

Oxford Economics’ forecasts for the Philippines are below the government’s target of 6.5 to 7.5 percent for this year, and 6.5 to eight percent for next year.

For 2024, Oxford Economics is forecasting a 5.8 percent growth, also lower than the government’s 6.5 to eight percent target.

“We believe 2023 is likely to be a difficult year for nearly all Asian economies. Growth should slow everywhere, except perhaps China and Thailand,” Oxford Economics said, citing easier policy settings in the former and the revival of tourism in the latter.

It said global growth slowdowns, stubborn inflation, and sticky policy rates are seen to pose challenges to most Asian economies.

The slowdown in advanced economies, which have been hit by rising inflation and tightening financial conditions, is seen to soften demand for Asian economies’ exports.

Oxford Economics sees exports contracting in the Philippines and most other Asian economies next year.

In addition, Oxford Economics said a shift in demand is likely to be seen.

“Asian exporters benefited hugely during the pandemic as consumers were unable to spend on services, and instead spent more on goods. But with the pandemic fading, a reversal of that trend is likely as demand shifts back towards services,” it said.

Oxford Economics said consumption demand is likewise seen to be limited by the need to rebuild savings.

Faced with high inflation, it said Asian interest rates are likely to continue rising to keep inflationary expectations anchored.

“Part of the adjustment will come via currency weakness. Rate rises should stop once an end to the Fed Fund hikes is in sight, which we believe will be sometime around Q2 (second quarter) 2023,” it said.

In the Philippines, Oxford Economics expects inflation to reach 5.8 percent this year, 4.4 percent next year, and 2.2 percent in 2024.

Inflation surged to a four-year high of 6.9 percent in September amid faster food price increases.

In the January to September period, inflation averaged 5.1 percent, higher than the Bangko Sentral ng Pilipinas’ two to four percent target.

For 2024, Oxford Economics said it has a more positive outlook, with much of the supply shock expected to fade by then.

“The wild card is how well the global economy, in particular China, adjustsas the shocks fade,” it said.