THE national government needs to develop new growth drivers to fast-track the country’s economic recovery and increase Filipino’s incomes, according to the Bank of the Philippine Islands (BPI) Global Markets.
BPI Global Markets Economist Rafael Alfonso Q. Manalili was quoted in a statement as saying that new growth drivers will also help protect the economy from future shocks. These new drivers could serve as a cushion during hard times.
“The long-term prospects of the economy are good overall. We believe that the economy will continue to grow in the coming years at a healthy pace, not only this year, because of our growth drivers,” Manalili said.
“The Philippine economy is a consumer-driven economy, and we have a strong consumer base. It’s an asset that has allowed us to grow by at least 6 percent in the past decade, but this makes us vulnerable in the context of a pandemic,” he added.
BASED on data shared by National Statistician Claire Dennis S. Mapa, the country’s gross domestic product (GDP) in current prices reached P22.02 trillion in 2022 from P19.41 trillion in 2021, P17.95 trillion in 2020 and P19.52 trillion in 2019.
In constant prices, which is adjusted for inflation, GDP was at P19.95 trillion from P18.54 trillion in 2021, P17.54 trillion in 2020 and P19.38 trillion in 2019.
However, per capita gross national income (GNI) in current prices reached P209,012 last year. This has exceeded the per capita GNI of the country at P200,135 in 2019.
Per capita GNI in constant prices, nonetheless, showed Filipinos only earned P188,939 in 2022. This is lower than the P198,522 per capita GNI in 2019. Household consumption and services were the ones most affected by the pandemic as people stayed at home for quarantine.
ACCORDING to Manalili, “the pandemic has taught us that we need to diversify our growth drivers.”
“We need to go beyond household consumption and services so that we can have an additional cushion in case another shock happens,” he was quoted in the statement as saying. “This will allow us to grow faster and will protect us from external shocks like the Covid-19 pandemic.”
Manalili added that the government should also fast-track infrastructure development to attract more investments.
The Philippines neighbors in the Association of Southeast Asian Nations (Asean) region have been able to ride on the global manufacturing boom during the pandemic, giving them a boost to gain momentum and recover faster. Thailand and Indonesia, to note, are less reliant on consumption and services and have a strong manufacturing base
Meanwhile, the Philippine manufacturing sector has grown modestly by three percent versus pre-pandemic level despite the support provided by global demand. Diversification towards investment spending, manufacturing, and exports is crucial as shown by the country’s experience during the pandemic.
“We need to reduce the cost of producing goods, and to do that, we need to improve infrastructure. We have the highest electricity rates and transport costs in the region. It’s feasible for us to improve on that,” Manalili said.
BPI expects the economy to grow by 5 percent to 6 percent in 2023 as local and global headwinds continue to weigh on growth.
One of the headwinds is high inflation which continues to beset consumer spending. “Inflation has gone up significantly and it has a significant impact on the economy because we are a consumer-driven economy,” he said.
“We expect average inflation to settle within the 4.5 percent to 5.5 percent range this year. The decline in inflation will be gradual or slow because of persistent supply constraints especially in the agriculture sector,” he added.
Another headwind is the aggressive interest rate hikes by central banks that are necessary to rein in the high inflation.
BPI expects additional rate hikes throughout the first half of 2023 before a pause in the second half and possibly even a rate cut if the US enters a recession, which could force the Federal Reserve to cut their rates.