Philippines among fastest growing ASEAN economy in next 2 years

MANILA, Philippines — The Philippines is seen emerging as the fastest growing economy among member countries of the Association of Southeast Asian Nations (ASEAN) over the next two years, according to DBS Bank Ltd. of Singapore.

In a report, Chua Han Teng, economist at DBS, said  the Philippines is expected to book the highest gross domestic product (GDP) growth in 2023 and 2024 in the region despite the global headwinds.

Teng said the Philippines would record a GDP expansion of 6.3 percent in 2023, faster than Vietnam’s six percent, Indonesia’s five percent, Malaysia’s four percent, Thailand’s 3.8 percent and Singapore’s 2.2 percent.

“Even as we expect 2022 growth to register above seven percent, we see the expansion cooling to 6.3 percent in 2023 (government’s range trimmed to six to seven percent from 6.5 to eight percent) given mounting headwinds,” Teng said.

According to Teng, the Philippine economy has stayed resilient this year and is expected to end 2022 with a GDP growth of 7.4 percent after averaging 7.7 percent in the first three quarters of the year, making it the third fastest economy after Malaysia’s 8.5 percent and Vietnam’s 7.8 percent.

“Growth is on track to exceed the upper end of the government’s 6.5 to 7.5 percent forecast for the year. Economic opening from the pandemic has been a key support, despite multiple challenges from rising domestic inflation and interest rates, as well as global headwinds,” Teng said.

The economist pointed out that domestic demand in 2023 is likely to be affected by still-elevated inflation, the lagged impact of aggressive monetary tightening by the Bangko Sentral ng Pilipinas (BSP) in 2022, and fading of pent-up demand and reopening gains.

He said the private consumption, which accounts for above 70 percent of GDP, would grow at a slower pace.

Philippine households, he explained, are already seen dipping into their savings and tapping loans given the high inflation environment, despite improving labor market conditions.

Teng said that waning business sentiment would weigh on investment, but the Marcos administration’s Build, Better, More infrastructure projects would provide support.

For 2024, the Philippines and Vietnam are seen booking a GDP growth of 6.5 percent, followed by Indonesia with six percent, Malaysia with 4.8 percent, Thailand with 3.6 percent, and Singapore with 2.8 percent.

Teng said that elevated inflation, initially driven by rising global commodity prices, has broadened with second-round effects, and is well above the BSP’s two to four percent target.

Inflation averaged 5.6 percent during the 11-month period after accelerating to a 14-year high of eight percent in November from 7.7 percent in October, prompting the BSP Monetary Board to hike interest rates by 300 basis points so far this year.

“We expect headline inflation to average 4.4 percent in 2023. Inflation would stay high in the first half of 2023, but peak and cool to the BSP’s target range in the second half of 2023, amid easing commodity prices and monetary tightening feed-through,” Teng said.