MANILA, Philippines — Philippine economic growth likely breached seven percent last year despite a sharp slowdown in the fourth quarter, according to economists.
Moody’s Analytics said the country’s gross domestic product (GDP) likely grew by 7.3 percent last year from 5.7 percent in 2021 despite slowing down to 6.1 percent in the fourth quarter.
“This will bring GDP growth for the year to 7.3 percent,” Moody’s Analytics said in its weekly highlights and preview report.
The Philippines emerged from the pandemic-induced recession with a GDP growth of 5.7 percent in 2021 after contracting by 9.6 percent in 2020 as the economy stalled due to strict COVID-19 quarantine and lockdown protocols.
Jonathan Koh, economist for Asia at Standard Chartered Bank, said the Philippine economy likely expanded by 7.2 percent last year.
Koh said the GDP growth slowed down to 5.8 percent between October and December last year due to the aggressive rate hikes delivered by the Bangko Sentral ng Pilipinas (BSP) to tame inflation and stabilize the peso.
“We expect GDP growth to have eased to 5.8 percent year-on-year in the fourth quarter from over seven percent year-on-year in the second quarter and the third quarter. We expect a 7.2-percent annual GDP growth,” Koh said.
According to Koh, consumer spending may have moderated on a year-on-year basis amid higher inflation in the fourth quarter.
Despite this, Koh pointed out that the robust labor market likely anchored private consumption growth.
Furthermore, the economist from Standard Chartered Bank said that capital goods imports slowed in the last quarter of 2022, likely reflecting softer investment on weakening business sentiment.
Meanwhile, Koh said exports may have contributed to the fourth quarter GDP amid strong electronics exports and tourism recovery.
For his part, HSBC economist for ASEAN Aris Dacanay said in a report that it is now expecting a 7.1 percent GDP growth instead of 6.9 percent for the Philippines for 2022.
The British banking giant also lifted its GDP growth forecast for the fourth quarter to 5.5 percent instead of 4.9 percent.
“The Philippine economy exhibited pockets of resilience in the final quarter of 2022. Exports performed well above expectations despite the global tech cooldown and despite forward-looking indicators in the Philippines signaling exports to eventually fall. And the reopening tailwinds, although fizzling, still had some momentum,” Dacanay said.
Dacanay said tourism has also dusted off its pandemic woes as tourist arrivals in the Philippines are now half of the figures before COVID-19.
The latest estimates from Standard Chartered Bank, Moody’s Analytics and HSBC were all within the 6.5 to 7.5 percent GDP growth target set by the Cabinet-level Development Budget Coordination Committee.
However, Dacanay said HSBC is looking at a slower Philippine economic growth of 4.4 percent in 2023 and 5.2 percent in 2024 as inflation and monetary tightening work with a lag.
“But amid the displays of resilience, cracks are getting larger, brought by the lagged effects of both high inflation (currently the highest in ASEAN) and high interest rates. Households have dipped into their savings in response to today’s higher cost of living,” Dacanay said.
The economist pointed out that consumption should slow in 2023 as households readjust their purchases and start to build their savings back up.
“History also shows that a high interest environment will likely put a drag on growth by reining in both consumption and investment. In fact, demand for big-ticket items, such as passenger and commercial vehicles, has softened after booming in the third quarter of last year. With consumption, investment and even trade likely to ease this year, we maintain our view that full-year growth in 2023 and 2024 will likely fall below trend,” Dacanay said.