MANILA -The Philippine economy’s better-than-expected performance in the first quarter of 2023 barely impressed private-sector economists, who kept their full-year growth forecast below the government’s most conservative assumption of 6 percent.
The Marcos administration’s economic team pointed out that the January-March readout was so far the best in the region, with Finance Secretary Benjamin Diokno noting that the Philippines outpaced neighbors such as China (4.5 percent), Indonesia (5 percent), Singapore (0.1 percent) and Vietnam (3.3 percent).
The interagency Development Budget Coordination Committee had expected the growth rate of Philippine gross domestic product (GDP) this year to be within the range of 6 to 7 percent.
But with the first quarter print going higher than forecasts, Budget Secretary Amenah Pangandaman said the economic team now projects growth in the next three quarters of 2023 to be within the range of 6.6 to 7.5 percent. She added that the full-year GDP growth target is now at about 7.1 percent.
“The country now has a dynamic domestic economy,” she said. “This means that even if the regional and global economic environment would worsen, ours has its own momentum and own dynamism to sustain growth.”
The first-quarter print was the slowest since the 12-percent growth recorded in the second quarter of 2021.
Tightening effects
BMI, a Fitch Solutions company, maintained its full-year forecast at 5.9 percent, thinking that the year-on-year growth rate will slow further over the next periods.
“The lagged impact of interest rate hikes will weigh more heavily on domestic activity, while weakness in external demand will drag on Philippine exports,” BMI said in a commentary.
“Our forecast implies that we are expecting real GDP growth to remain on a slowing trend over the coming quarters,” it added.
BMI thinks that the Philippine economy will continue to slow due to three reasons.
First, high interest rates will continue feeding through to the economy, acting as a drag on investment appetite.
Second, the Philippines will receive little external support amid tepid global demand, even though the recovery in China will help to provide some offset.
And third, pent-up demand will fade and elevated rates of inflation and higher borrowing costs will weigh more heavily on private consumption growth ahead.
Lower expectations
Meanwhile, Goldman Sachs revised downward its 2023 forecast to 5.9 percent from 6 percent.
The New York City-based group did so considering the preliminary first-quarter readout as well as downward GDP growth rate revisions in previous quarters.
On the other hand, United Kingdom-based Pantheon Macroeconomics revised upward its forecast, but still below the government’s goal at 5.5 percent from 4.5 percent previously.
“The slowdown [in the first quarter] was more modest than we expected, so we have upgraded our 2023 forecast,” said Miguel Chanco, chief economist on emerging Asian economies.
Japan-based Nomura maintained their 2023 forecast at 5.5 percent, citing weakening exports and less resilient consumer spending.
On the other hand, Bank of the Philippine Islands (BPI) raised their full-year forecast to 6.3 percent from a range of 5 to 6 percent previously, mainly based on the first-quarter print as well as the improving outlook for inflation.
“Now that the GDP is above the prepandemic level, growth should revert to its potential level of around 6 percent,” BPI said. INQ
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