As of January-September 2023, the growth rate of the gross domestic product is recorded at 5.5%, which is still lower than the government’s full-year target of 6% to 7%.
According to the Philippine Statistics Authority, the economy exceeded expectations by growing at a rate of 5.9% in the third quarter, despite the high prices of goods. This rebounded from the previous quarter’s disappointing growth of 4.3%. Analysts surveyed by BusinessWorld had projected third-quarter growth to reach 4.9%.
In the third quarter, agriculture grew at a rate of 0.9%, while industry and services increased by 5.5% and 6.8%, respectively. Currently, the Philippines has the fastest-growing economy among Asian nations that have released their third quarter GDP growth rates, surpassing Vietnam at 5.3%, Indonesia and China at 4.9%, and Malaysia at 3.3%.
Public spending has increased by 6.7%, which is a significant improvement from the 0.7% decline reported in the previous quarter. Arsenio Balisacan, the National Economic and Development Authority Secretary, applauded government agencies for implementing their catch-up spending plans to address the previous quarter’s contraction in spending.
Net exports have increased by 12.9% in the third quarter, contributing to the growth of GDP. Election spending has also boosted the economy, according to the Rizal Commercial Banking Corporation’s chief economist Michael Ricafort.
However, for January-September 2023, GDP growth remains below the government’s target range, standing at 5.5%. To achieve the goal, fourth quarter growth must reach at least 7.2%, but multilateral lenders and experts anticipate that the government will miss this target.
The Bangko Sentral ng Pilipinas has raised interest rates aggressively in response to high inflation. While the move has curbed inflation, it has also slowed down economic growth. The average inflation rate for the year is 6.4%, which is still significantly higher than the target range of 2% to 4%.
Upon closer inspection of the data, it is evident that households are feeling the impact of inflation. Household consumption has decreased to 5%, which is the slowest pace since the 4.8% recorded in the second quarter of 2021. This is primarily due to an 8.2% increase in food inflation.
Gross capital formation, which refers to the accumulation of capital goods like equipment, transportation assets, and electricity, has dropped 1.6%, mainly due to the significant reduction in inventories and the slowdown in durable equipment.
Capital goods are essential for replacing older equipment used to produce goods and services, which means that higher capital formation is necessary for achieving overall economic growth.
The IBON Foundation’s executive director Sonny Africa referred to the third quarter growth as “job-destroying,” citing a 1.7% decline in employment, which equates to 825,000 job losses, bringing the total number of poor individuals up, despite the growth figures.
The Philippine economy is projected to grow by 6.2% in 2024, according to the Asian Development Bank (ADB). This is slightly lower than the 6.5% growth forecast for 2023, but it is still a healthy rate of expansion.
The growth outlook for the Philippine economy is supported by a number of factors, including:
However, there are also some downside risks to the outlook, including:
Overall, the Philippine economy is expected to continue to grow in 2024, albeit at a slightly slower pace than in 2023. The key to maintaining this growth momentum will be to manage the downside risks effectively and continue to implement supportive policies.
