PH has ‘big chance’ of avoiding 2023 recession, says BPI lead economist

The Philippine economy will likely avoid a recession in 2023 as “lagging sectors” will help push growth to 5.6 percent next year, according to the Bank of the Philippine Islands (BPI).

BPI lead economist Jun Neri said segments such as arts and entertainment, restaurants, hotels, transportation and construction are among those that have yet to reap the full benefits of the postpandemic business resurgence.

“The [Philippine] economy has a big chance of avoiding a recession in 2023,” said Neri, who shared their outlook for the next two years during a media briefing on Wednesday.

In 2024, the county’s gross domestic product (GDP) would expand by 5.8 percent, according to BPI.

Another factor that would lift the economy would be the sustained household spending while high inflation of 5.8 percent this year will likely ease to 4.8 percent in 2023. By 2024, it will fall to 3 percent, which is within the government’s target range of 2-4 percent.

For now, inflation was trending higher although Neri expected the surge in prices to peak within the next two to three months.

Meanwhile, BPI sees the current account deficit in 2023 shrinking to 4.5 percent of GDP versus the estimate of 5.8 percent this year.

“[W]ith slower hikes, a pause and a cut later on in 2023, portfolio flows will likely reverse in 2023 to provide additional support to [the Philippine peso],” he said.

The peso will end at 56.10 against the dollar for 2022 before strengthening to P55.9 by the end of 2023.

He said domestic interest rates would also peak either in the second or third quarter of next year before falling later in 2023 or early 2024.

“Unfortunately because the effect of monetary policy has lags, the benefit to the economy will probably be felt well into 2024, rather than next year,” Neri said.

“This improvement in financial conditions combined with nominal growth of 10 percent next year will likely keep [Philippine] debt-to-GDP ratio to decline slightly but will likely remain above 60 percent through late 2023,” he added.