AMRO keeps Philippine growth, inflation outlook

MANILA, Philippines — The Philippine economy is poised to maintain its pace of expansion this year as inflation sharply declined, considering its reliance on consumer spending to churn growth.

In a press conference on Tuesday, experts at ASEAN+3 Macroeconomic Research Office (AMRO) kept its growth and inflation outlook on the Philippine economy, with gross domestic product seen averaging 6.2% in 2023 and then 6.5% in 2024. 

Consumer price growth is expected to average 5.9% this year then sharply retreat to 3.8% in 2024, as AMRO maintained their outlook on the Philippine economy. 

Much of the optimism stems from the structure of the Philippine economy, said Dr Hoe Ee Khor, AMRO’s chief economist. 

“...Because of the structure of the economy, the other economies are dependent on manufacturing, whereas the Philippines is a service-driven economy,” he said. 

For one, the majority of the country’s GDP comes from consumer spending. The Philippine economy managed to post growth in the third quarter of 2022 on the back of consumption as mobility restrictions were loosened.

On top of that, money sent home by overseas Filipinos fuel consumer spending and household incomes. The Bangko Sentral ng Pilipinas said that 8.9% of the country’s GDP last year was driven by remittances. 

Inflation has been a positive development for economic managers of the Marcos Jr. administration, as the deceleration reinforced the impact of an aggressive monetary policy. The BSP has injected 425 basis points into borrowing costs since May 2022 to curb price growth, despite admitting that expensive prices were the result of supply chain bottlenecks here and abroad. 

Inflation cooled down to 5.4% in June, which supported the central bank’s rate pause stance.

The ASEAN region’s growth prospects were revised down, as AMRO was wary of the impacts of roiling headwinds. Weak global exports, hampered by anemic demand everywhere, worried the think tank.

Growth across the global economy was anchored on tourism supporting the region’s recovery.

AMRO expects the ASEAN region to expand at a softer pace of 4.5% in 2023, slightly slower compared to their previous projection of 4.9% in April. Even then, the regional think tank is bullish on the region’s prospects of turning a corner towards the end of the year.

“Downside risks have receded slightly primarily on account of better-than-expected improvement in the global economy,” they added.