The Philippine economy expanded by a below-target 5.6 percent in 2023 as investments, household consumption, and government spending slowed, according to data from the Philippine Statistics Authority. This growth rate is significantly lower than the 7.6 percent achieved in 2022 and falls below the government’s target range of 6.0 to 7.0 percent for the year.
The fourth quarter growth was also 5.6 percent, slightly lower than the previous quarter’s revised 6.0 percent and the year-earlier 7.1 percent. While this result was expected, it still places the Philippines as one of the best-performing economies in Asia, according to Socioeconomic Planning Secretary Arsenio Balisacan.
In comparison to other countries that have reported their fourth-quarter 2023 real gross domestic product (GDP) growth, the Philippines trailed behind Vietnam’s 6.7 percent but outperformed China’s 5.2 percent and Malaysia’s 3.4 percent.
The main economic sectors in the Philippines, namely agriculture, industry, and services, experienced growth rates of 1.4 percent, 3.2 percent, and 7.4 percent, respectively, in the last three months of 2023. These sectors also posted positive full-year results, with agriculture growing by 1.2 percent, industry by 3.6 percent, and services by 7.2 percent.
Digging deeper into the fourth quarter, the growth was primarily driven by financial and insurance activities (11.8 percent), wholesale and retail trade (5.2 percent), and construction (8.5 percent). For the full year, the top contributors were wholesale and retail trade (5.5 percent), financial and insurance activities (8.9 percent), and construction (8.8 percent).
On the demand side, household consumption increased by 5.3 percent in the fourth quarter, while investments and imports saw annual growth rates of 11.2 percent and 2.9 percent, respectively. However, government expenditures and exports fell by 1.8 percent and 2.6 percent, respectively.
The slowdown in household spending and investments can be attributed to the impact of interest rate hikes implemented by the Bangko Sentral ng Pilipinas (BSP) to control inflation. The BSP’s benchmark rate currently stands at 6.5 percent, the highest since 2007, after a series of rate hikes starting in May 2022. The longer-term effects of these rate hikes, combined with the swift impact of inflation on household consumption, have contributed to the observed slowdown in the economy.
Socioeconomic Planning Secretary Arsenio Balisacan expressed concern over sluggish growth in food spending, which can be attributed to high food prices despite recent moderation in inflation. He also mentioned that the full-year slowdown may be a result of past interest rate increases and the fiscal consolidation program, as well as the effects of election spending and ongoing vaccination measures in 2022.
Inflation reached a 14-year high of 8.7 percent in January but returned to the BSP’s target range of 2.0 to 4.0 percent in December, with a full-year average of 6.0 percent. However, the rate could spike later in the year due to the impact of the El Niño weather pattern. The BSP has announced that interest rates will remain unchanged until inflation stabilizes within the target range.
Despite the slowdown, the Philippines remains one of the best-performing economies in Asia. The government’s focus on controlling inflation and implementing measures to stimulate investments and household consumption will be crucial in ensuring sustained economic growth in the coming years.
Source: The Manila Times
