The Bangko Sentral ng Pilipinas (BSP) is harboring a “relatively strong” outlook for the Philippine economy in the fourth quarter of 2023, expecting growth to be akin to the third-quarter surprise of 5.9 percent.
Dennis Lapid, director of the BSP’s department of economic research, said in a press briefing that such an outlook was partly due to the lagged effects of what is considered one of the most aggressive policy tightening cycles in Asia.
The central bank’s key policy rate is currently at 6.5 percent, having been raised from a pandemic-induced historic low of 2 percent starting in May 2022.
“Based on [our] forecast, much of the impact of the tightening that we’ve done so far will mostly fall in 2024,” Lapaid said.
Before the higher-than-expected expansion in the July-September quarter, the growth of Philippine gross domestic product disappointed at 4.3 percent in the April-June period.
This was blamed largely to less sanguine private-sector consumption as well as a drop in government spending.
Still, the third-quarter surprise was the second slowest for any quarter since the domestic economy emerged from five consecutive quarters of contraction up to the first quarter of 2021.
“The (prevailing) assessment is that the overall growth momentum of the economy still remains intact,” Lapid said. “We were seeing a relatively strong outlook for fourth-quarter GDP (this year).”
He noted that the national government is committing to push the economy’s growth towards its target of 6 percent to 7 percent for 2023.
Lapid added that the Marcos administration’s economic team made a big push in terms of government spending in the third quarter, efforts that the BSP is also seeing during the current quarter.
BSP Governor Eli Remolona Jr. said the central bank makes sure that when they have to tighten monetary policy — mainly by raising its key policy rate — to bring inflation down, it is done because it is necessary.
“We don’t want to tighten so that it affects growth (but if this happens or when the BSP takes a misstep), the output loss is going to be temporary,” Remolona said. “We don’t want to affect output in the long run, at the very least.”
In their latest monthly research report, First Metro Investment Corp. and the University of Asia and the Pacific said they continue to see Philippine growth in 2023 falling short of the government’s target.
“With few surprises from economic data releases in the rest of December, we confirm our 5.5-percent GDP growth outlook for 2023, with an upward bias,” FMIC and UA&P said.
Their assumption is that last-minute spending by the national government in November and December should provide a good boost to aggregate demand in the fourth quarter and spill over into the first quarter of 2024.
“Apart from a rush to complete infrastructure projects, 13th-month pay (also for the private sector) should add a lift to consumer spending,” they added.