Philippines expects economy to moderate

MANILA, Philippines — The Philippine economy is projected to churn at a moderate pace in coming months as inflation decelerated, with expectations to still hit its growth target this year. 

That was the assessment of the National Economic Development Authority, a day after President Ferdinand Marcos Jr staged his annual national address. 

The Philippines’ gross domestic product grew 6.4% year-on-year in the first three months of the year. This was slower compared to the annual growth rate of 7.1% recorded in the fourth quarter of 2022, and the 8.0% expansion recorded a year ago.

“We’ll probably see growth further moderate but you know not far enough to allow us to miss the target,” NEDA chief Arsenio Balisacan told reporters on Tuesday.

Economic managers are eyeing the Philippine economy to grow at a clip of 6-7% this year, amid headwinds that threaten to unspool growth. Consumer spending kept the domestic economy afloat for most of 2022, expanding 7.6% on an annual basis despite brutally-high inflation.

Balisacan explained that he was “still hoping that we would achieve the target of 6-7%,” as the domestic economy would need to churn 5.9% in the remaining three quarters to achieve the low-end of the target. 

The economy’s relative resilience against external headwinds figured at the center of Marcos Jr’s second state of the nation address, which experts criticized lacked concrete plans to generate growth. 

Experts are not holding their breath since core inflation, computed without volatile items such as fuel, hit 7.7% in the first six months of 2023. The prospects of expensive consumer prices have forced Filipinos to rethink spending habits, which are likely to dent growth since consumption is a cornerstone of the domestic economy.

Likewise, the prospects of expensive borrowing costs started to shape the domestic economy. The Bangko Sentral ng Pilipinas injected 425 basis points into benchmark lending rates since May 2022 to tame surging inflation. Interest rates currently stood at 6.25%, as the central bank kept monetary policy on hold. 

Despite this,  financial institutions such as the Asian Development Bank, kept their growth outlook on the Philippine economy. Their projection hinged on consumer spending, which resurfaced as mobility restrictions were lifted towards the end of 2022, anchoring the domestic economy. — Ramon Royandoyan