The Philippines is expected to outpace economic powerhouses on the Asian side of the Pacific in terms of gross domestic product (GDP) growth in 2023 as the region sidesteps a global tide of recession despite uncertainties in China.
According to Moody’s Analytics, GDP growth in the Philippines this year—projected at 6.4 percent—will outpace those of Southeast Asian dynamos Vietnam and Singapore as well as developed economies Japan, South Korea, Australia and New Zealand.
Runner-up
The research firm said in a report that Malaysia may have led the western Pacific economies in 2022 at more than 9 percent while the Philippines is in the runner-up pack along with Vietnam and India at more than 7 percent.
In comparison, the region’s emerged economies are expected to grow slower at between 1 and 4 percent.
Moody’s Analytics has bumped up its forecast on Philippine growth in 2022 to 7.4 percent from 6.7 percent previously.
The company observes that the Philippines felt the lagged effect of postpandemic reopening as the country had the longest continuous lockdowns of any country in the region.
“The Philippines 2023 economic outlook is sanguine, but we expect growth to slow to 6.4 percent … given external headwinds and internal challenges,” Moody’s Analytics associate economist Sonia Zhu said.
“The risk of recession in the United States and a lack of confidence in China’s recovery will likely spill over to demand for exports from the Philippines, while persistent high inflation will dampen domestic consumption,” Zhu said.
Elevated inflation
She added that the biggest risk facing domestic demand is elevated inflation, which hit a 14-year high of 8 percent in November but which Moody’s Analytics projects to peak in early 2023. The Bangko Sentral ng Pilipinas believes that inflation may have hit its highest in December at as high as 8.6 percent.
“Fiscal support will do the heavy lifting in the coming year as the Marcos administration extended fiscal stimulus into 2023, which will help to bolster growth, support domestic spending, and continue investment in legacy infrastructure programs left behind by the Duterte government,” Zhu said.
Across the western Pacific economies, Moody’s Analytics said they should collectively avoid recession in 2023 as recoveries continue among domestic economies around the region.
Altogether, these economies are poised to grow faster from 3.2 percent in 2022 to 3.5 percent this year.
Still, faster growth will be driven by the expected rebound of China by the second half of 2023 as the economic giant addresses problems like an expected surge in COVID-19 cases in the first half due to the easing of most restrictions within an environment of little herd immunity, limited public health capacity, and a lack of vaccines approved for use in the country.
Moody’s Analytics sees growth in most economies in western Pacific to decelerate in 2023 as the region’s export economies face less demand from Europe and the United States—markets that face the possibility of recession this year.