Economy seen growing above 6% in 2023

MANILA, Philippines — The country’s economic growth is expected to slow in 2023 but still above six percent, according to Yuchengco-led Rizal Commercial Banking Corp. (RCBC).

RCBC chief economist Michael Ricafort said the gross domestic product (GDP) is likely to normalize to a range of six to 6.5 percent in 2023 from the projected 7.5 to 7.7 percent this year.

“Risks or headwinds include higher prices, higher interest rates, risk of US recession that could slow down global economic growth, global trade, investments, remittances, jobs or employment, other economic activities worldwide,” Ricafort said.

He said  this could be aggravated by continued COVID-19 lockdowns in China, which is the world’s second largest economy,  and could slow down global economic growth as well as aggravate global supply chain disruptions since the pandemic started.

Ricafort said geopolitical risks, especially the continued Russia-Ukraine conflict since February, could still lead to more sanctions and other restrictions that could aggravate global supply chain disruptions that also add up to inflationary pressures.

“The Russia-Ukraine war led to higher global commodity prices earlier this year and the main source of elevated inflation in many parts of the world, that prompted aggressive Fed rate hikes in the quest to significantly bring down elevated US inflation that led to a stronger US dollar worldwide and risks of US recession, going forward as unintended consequences,” he said.

He said the easing of COVID-19 restrictions in China would help economic prospects in the region and in the rest of the world in terms of more global trade and possible resumption of tourism from China, which is a major source of tourists for many countries such as the Philippines,

“Some ASEAN economies, such as the Philippines, may be more resilient amid risk of US recession in view of the attractive demographics and improved economic and credit fundamentals in recent years,” he said.

Ricafort said more rate hikes by the US Federal Reserve amid the latest hawkish signals could increase the odds of recession as an unintended consequence amid the quest to significantly bring down elevated inflation.

“Aggressive Fed rate hikes led to a stronger US dollar in recent months that added to the importation costs and overall inflation of some Asian countries,” he said.

Ricafort sees inflation in the Philippines easing to between 4.5 and 5.5 percent next year from 5.8 percent as year-on-year inflation would ease largely due to the drop of global crude oil prices to near one-year lows.

He said other important economic growth drivers for 2023 and beyond include the near record high remittances from overseas Filipino workers, record high employment and unemployment rate matching record lows recently, manufacturing among pre-pandemic highs and further increase in government spending.

Ricafort also cited the continued growth business process outsourcing (BPO), the resurgence in mining activities especially green minerals used in the global supply chain for batteries, electric vehicles, renewable power, among others as well as the intensification of productivity in agriculture, manufacturing, tourism, and other priority sectors.

Early this month, economic managers slashed the country’s GDP growth target to a range of six to seven percent from 6.5 to eight percent next year from the projected 6.5 to 7.5 percent for this year due to heightened global headwinds.