Even though global growth is forecast lower this year than in 2022, individual country output growth measured as the gross domestic product (GDP) should still prove substantial for Asian economies like the Philippines, for instance, so long as China continues to expand, according to the International Monetary Fund.
IMF managing director Kristalina Georgiva at the China Development Forum in Washington DC said China, which posted GDP averaging only 3 percent last year, is forecast to expand more than two percentage points higher this year to 5.2 percent instead.
“This matters for China, and it matters for the world. The robust rebound means China is set to account for around a third of global growth in 2023 – giving a welcome lift to the world economy.
“And beyond the direct contribution to global growth, our analysis shows that a 1 percentage growth in GDP in China leads to a 0.3 percentage point increase in growth in other Asian economies, on average – a welcome boost,” the IMF chief said.
This development, she continued, presents opportunities for policymakers around the world to respond such that their own potential for economic expansion is optimized.
“The first opportunity is to raise productivity and rebalance the economy away from investment and towards more consumption-driven growth that is more durable, less reliant on debt, and will also help address climate challenges.
“To get there, the social protection system will need to play a central role through higher health and unemployment insurance benefits to cushion households against shocks. At the same time, market-oriented reforms to level the playing field between the private sector and state-owned enterprises, together with investments in education, would significantly lift the economy’s productive capacity.
In the case of the Philippines and based on data from the Philippine Statistics Authority (PSA), its continued expansion was driven by the services sector which accounted for the bulk or 57 percent of GDP last year.
This relates to such key segments as trade, repair of motor vehicles and household goods making up 17 percent of GDP; real estate, renting and business activities accounting for another 11 percent; transport, storage and communication also 8 percent; financial services only 7 percent; and public administration, defense and social security of only 4 percent.
Industry, which includes manufacturing and construction, accounted for 31 percent of local output growth while agriculture made up the balance of 12 percent.
Output growth topped forecasts last year when the economy expanded by 7.6 percent, higher than forecast ranging only from 6.5 percent up to 7.5 percent on the back of robust consumption activities no matter than inflation at 5.8 percent last year proved way above the target of up to 4 percent and interest rates best indicated by the rate at which the Bangko Sentral ng Pilipinas (BSP) borrows from banks already average 6.25 percent at the moment, the highest since 2007.
Household and commercial loan rates are pegged to the BSP’s borrowing rate and are closely watched by economists, lenders and market watchers alike.
Some analysts project domestic interest rates to approximate 5 percent next year and lower to around 4 percent in 2025.
As for inflation, this was seen approximating 3.1 percent in 2024 and more or less at 3.2 percent in 2025 although the forecast is for inflation to average 8.3 percent in March or unchanged from headline inflation in February announced earlier by the PSA.
Previously, the IMF acknowledged that continued global expansion should prove challenging once more this year when global GDP is forecast at 3 percent on account of economic scarring from the pandemic, the conflict in Ukraine and the collective efforts of central banks around the world to address inflation which has weighed heavily on household and business entity ability to access money for either consumption or investment purposes.
