British banking giant HSBC said the Philippine economy likely grew above seven percent in 2022 despite the sharp slowdown in the fourth quarter last year.
HSBC economist for ASEAN, Aris Dacanay, said the country’s gross domestic product (GDP) likely expanded by 7.1 percent instead of 6.9 percent in 2022.
This despite the sharp slowdown in the fourth quarter to 5.5 percent from 7.6 percent in the third quarter last year.
“The Philippine economy exhibited pockets of resilience in the final quarter of 2022. Exports performed well above expectations despite the global tech cool down and despite forward-looking indicators in the Philippines signaling exports to eventually fall. And the reopening tailwinds, although fizzling, still had some momentum.”
HSBC economist for ASEAN, Aris Dacanay
This prompted the foreign bank to raised its GDP growth forecast for the October-to-December period from the previous 4.9 percent.
According to Dacanay, tourism has dusted off its pandemic woes as tourist arrivals are now half the volume before COVID-19.
Furthermore, jobs, too, exhibited strong growth in the quarter as more adults were available to rejoin the workforce and contribute to the economy, with kids finally back – physically – in school.
“We therefore lift our 4Q22 GDP forecast to 5.5 percent year-on-year (previously 4.9 percent). Consequently, this lifts our full-year 2022 growth forecast from 6.9 percent to 7.1 percent, which means growth will likely fall within the government’s 2022 growth target of 6.5-7.5 percent,” Dacanay said.
But amidst the displays of resilience, he pointed out that cracks in the growth façade are getting larger, brought about by the lagged effects of both high inflation (currently the highest in ASEAN) and high interest rates.
“Households have dipped into their savings in response to today’s higher cost of living. Thus, consumption should slow in 2023 as households readjust their purchases and start to build their savings back up. History also shows that a high interest environment will likely put a drag on growth by reining in both consumption and investment,” he added.
HSBC sees a sharp slowdown in GDP growth to 4.4 percent this year before improving to 5.2 percent next year.
“With consumption, investment, and even trade likely to ease this year, we maintain our view that full-year growth in 2023 and 2024 will likely fall below trend,” Dacanay said.
