The Philippines in 2023 is projected to post growth, measured as the gross domestic product (GDP), averaging lower than the official growth target of 6 to 7 percent to only 5.7 percent, according to the Asian Development Bank.
First forecast by the Manila-based multilateral lender in December, this was unchanged from forecast growth bared the previous September and the second fastest such expansion in the region after Vietnam’s.
This develops parallel to more sanguine forecasts by First Metro Investment Corp. (FMIC) indicating local output growth averaging higher at 6 percent this year.
“External uncertainties such as the movements of the (US) Fed and a potential sharper slowdown in China could drag on growth. Amidst all this, the country’s economy, with its strong macroeconomic fundamentals, is expected to expand by 6 percent,” FMCI president Jose Patricio Dumlao, said.
The top man at the investment banking arm of the Metrobank Group said the forecast expansion is fueled by robust private consumption, increased government infrastructure spending, a strong labor market, and the recovery of domestic tourism.
The executive also said inflation, or the rate of change in prices that saw a 14-year high of 8.7 percent last year, is seen easing to only 3.8 percent this year.
The ADB similarly kept the continued, albeit slower, expansion of the local economy this year at only 4 percent, the same forecast made in September and consistent with its forecast of a significantly slower Southeast Asia likely growing by 4.3 percent instead of 4.7 percent projected earlier.
Forecast growth across the 10-nation ASEAN, the ADB said, is based mainly on weak external demand. Developing Asia, which covers 22 separate economies (including China) and comprising 94 percent of the region’s GDP, is forecast to grow by 4.9 percent in 2023 but likely slower this year to 4.8 percent.
The ADB missed its forecast inflation averaging 6.2 percent in the Philippines last year that at 6 percent in 2023 nevertheless proved well above the 2 to 4 percent target range. It has kept the 4 percent inflation forecast for this year, the same one it projected the previous September.
The forecast inflation this year does not bode well for the Philippines that at 6.2 percent is second-highest after Vietnam’s. Inflation, economists correctly point out, acts as a tax on virtually everything from the cost of services and goods to one’s capacity or inclination to save rather spend.
Inflation across Vietnam, whose economy is now larger than the Philippines, is forecast to average 6 percent, higher than Indonesia’s 5 percent, Malaysia’s 4.6 percent or Thailand’s 3.7 percent. Inflation in Singapore is seen no higher than 2.5 percent this year.
Foreign observers have reported that inflation in the Philippines this year will likely tread lower levels, averaging as low as 3.2 percent in the first quarter and decelerating even more in the second quarter to 2.7 percent. The policy-making monetary board of the Bangko Sentral ng Pilipinas, when it last reported on the subject, projected the 2024 inflation averaging significantly lower to only 3.7 percent.
The ADB has acknowledged that price pressures developing Asia economies have eased and that headline inflation for most economies in the region have posted within-target inflation rates in recent months.
The easing has allowed central banks in the region to adjust their rate hiking cycle and that some, including Vietnam and China, have started to loosen their policy stance.
This was part of the reason why the ADB has kept unchanged developing Asia’s growth outlook this year at 4.8 percent with domestic demand and services continuing to support growth and the manufacturing sector gradually picking up pace.
