The Philippine economy is projected to post a slower growth this year and move further away from the government’s target as consumer spending, a traditional growth driver, continues to come under pressure from tight household budgets, a London-based think tank said.
Gross domestic product (GDP) is forecast to grow at an annualized rate of 4.8 percent this year, Miguel Chanco, economist at Pantheon Macroeconomics, said in an emailed commentary.
If realized, this year’s growth will then be weaker than Chanco’s projection of a 5.4-percent expansion in 2023, in turn a material deceleration from the 7.2-percent actual growth in 2022. The government will release the 2023 GDP numbers on Jan. 31.
Chanco’s forecast is also way below the Marcos administration’s growth targets of 6 to 7 percent in 2023, and 6.5 to 7.5 percent in 2024.
“Private consumption—the economy’s main engine—should weaken further, hampered by poor household balance sheets,” he said.
The country’s GDP snapped three consecutive quarters of slow growth when it expanded 5.9 percent in the July-September period last year.
Government spending
What saved the economy from another slowdown was brisk government spending, which picked up the slack from household consumption that grew at a slower pace of 5.5 percent as brutally high inflation forced millions of Filipinos to tighten their belts.
So far, inflation has dampened consumer confidence. Results of the latest consumer expectations survey by the Bangko Sentral ng Pilipinas (BSP) showed households were less optimistic for the next 12 months.
The BSP also reported that the percentage of Filipino families with savings dropped to 29.1 percent in the fourth quarter of 2023, from 32.8 percent in the preceding three months, amid rising consumer prices.
Chanco said another indicator of weak consumer demand was the deeper slump in local factories’ sales to 7.3 percent in November, from the 3.0 percent contraction in October.
“The deterioration in trends at the margin in the last two (sales) reports indicates that domestic demand entered 2024 with waning momentum,” he said. —Ian Nicolas P. Cigaral INQ