THE National Economic and Development Authority (Neda) said the government is now within striking distance of its GDP growth target for 2022 after the Philippine Statistics Authority (PSA) announced that the economy grew faster in the third quarter.
On Thursday, the PSA reported that the economy expanded by 7.6 percent in the third quarter. This is faster than the 7.5 percent posted in the second quarter of the year and the 7 percent recorded in same period last year.
The latest GDP print brings the average growth in January to September to 7.7 percent. The government’s GDP growth target for the year is 6.5 percent to 7.5 percent.
According to Socioeconomic Planning Secretary Arsenio M. Balisacan, the third quarter GDP exceeded the “median analyst forecast of 6.3 percent” and made the Philippines the second-fastest growing economy in Asean.
On a seasonally adjusted quarter-per-quarter basis, Balisacan noted that the Philippine economy grew by 2.9 percent, which he said signifies the country’s “solid posture” against current domestic and external risks.
“With this, we are on track to achieving the government’s growth target of 6.5 to 7.5 percent for 2022. Given the latest GDP outturn, our economy needs to grow by 3.3 to 6.9 percent in the fourth quarter,” Balisacan said on Thursday.
The socioeconomic planning chief and local economists agree that the economic performance in the third quarter was mainly due to the further easing of mobility restrictions and the resumption of face-to-face classes in August, which boosted consumption.
Balisacan said the relaxation of border restrictions and “more simplified” travel protocols also contributed to the growth of local tourism and other sectors severely affected by the pandemic, resulting in economic expansion in the third quarter.
He said GDP growth in the third quarter would have been faster “if not for those increases in consumer prices” adding that, “one would have expected higher economic performance.”
Risks to growth outlook
The Neda chief said the “only risk” facing the Philippines is the increase in prices. Economists said this could dampen consumer demand and affect the economic performance of the Philippines.
Oxford Economics said despite the “strong” outturn in the third quarter, the Philippine economy’s growth momentum will “decelerate in the coming quarters.”
“Inflation, which we see peaking in the fourth quarter, will continue to weigh on household spending. Moreover, growing external headwinds, including elevated commodity prices, tighter financial conditions globally, a recession in the advanced economies, and China slowdown, will reduce demand for Philippines’s goods exports,” Oxford Economics said.
Unionbank Chief Economist Ruben Carlo O. Asuncion expects the Philippine economy to grow in the fourth quarter, albeit at a slower pace. Asuncion said growth will come from higher consumer spending during the holiday season.
“It was a surprise, the third quarter GDP print. This indicates the resiliency of the economy even amid rising inflation, higher interest rates, and the weaker Philippine peso,” Asuncion told the BusinessMirror.
“Nevertheless, I expect the fourth quarter GDP to be slower but still respectable. We now have to raise our end-2022 GDP growth expectations at this point. We are seeing higher demand amid the seasonal consumption that we will experience come the last quarter of the year,” he added.
To tame inflation and protect the purchasing power of Filipinos, Balisacan said the government will continue to provide cash transfers, fuel discounts, and other forms of targeted assistance.
He said the government is also focused on boosting domestic agricultural production to ensure that Filipinos families would have adequate food supply.
“We are also considering the extension of Executive Order No. 171, which significantly reduces tariffs on rice, pork, and corn, thereby enhancing food security while food prices remain elevated,” Balisacan said.
To sustain economic growth, Michael Ricafort, Rizal Commercial Banking Corporation (RCBC) chief economist, said the government should work on increasing the productivity of both agriculture and manufacturing sectors since both agriculture and manufacturing sectors “account for at least 40 percent of jobs in the country and nearly 40 percent of the economy.”
Ricafort added that the focus on agriculture and the manufacturing sectors would create more jobs and accelerate GDP growth.