Our economic growth story is intertwined with inflation. Rising prices curb consumer spending and make a dent on economic growth. Such adverse economic data serve as fodder for critics and naysayers of the administration.
Detractors of the government, however, are in for a disappointment. The economy is still expanding and is not pausing, as some cynics would like to believe.
Several multilateral banks have readjusted their 2023 growth forecasts for the Philippines amid the global headwinds, but it is important to note that we still have one of the fastest-growing economies in the Asia-Pacific region.
The Asian Development Bank (ADB) says while our gross domestic product (GDP) growth would moderate to 5.7 percent this year from its previous estimate of 6.0 percent, it is still impressive compared with the rest of Asia.
The forecast for the Philippines is in fact faster than 5.0 percent for Indonesia, 4.5 percent for Malaysia, 3.5 percent for Thailand and 1.0 percent for Singapore, and just a tad lower than 5.8 percent for Vietnam.
The Philippines is expected to grow 6.2 percent in 2024, still one of the highest in the region.
What these figures tell me is that the Philippines continues to exhibit strong macro-economic fundamentals despite the threat of elevated inflation and interest rates, which are affecting advanced economies such as the United States and the European Union.
Per the ADB, the Philippines’ growth story remains strong despite an expected moderation in 2023. ADB Philippines Country Director Pavit Ramachandran says public investment and private spending fueled by low unemployment rate, sustained increase in remittances and buoyant services including tourism will support growth this year, while large infrastructure projects will stimulate consumption, boost jobs and spur more investment.
Challenges remain, including geopolitical tensions and a sharper-than-expected slowdown in major advanced economies, according to the ADB’s Asian Development Outlook. Economists are particularly worried over the weaknesses in China’s property sector, the wide-ranging effects of the El Niño dry spell on food security and financial stability risks in vulnerable economies.
In the Philippines, however, the property sector is still growing because of the huge demand for housing. The government is also focusing on addressing food security issues, while the Bangko Sentral ng Pilipinas said the Philippine banking sector remains strong and stable.
I am confident that growth would pick up in the fourth quarter of 2023 because of greater mobility in the days leading to the Christmas season. Consumers are back, and tourists are coming in droves, filling hotels, resorts, restaurants and shopping malls across the country.
Power consumption is on the rise, reflecting more active business and household activities this year. These positive indicators present opportunities for the private sector to invest in more generation facilities, especially in the renewable energy sector.
Our balance of payments (BOP) is also improving, thanks to remittances, business process outsourcing receipts and tourism revenues that began to trickle this year. A more balanced BOP position translates into a stable foreign exchange rate, which is good for the economy. The peso has been relatively stable within a range of 56 to 57 against the US dollar in recent weeks.
Meanwhile, our gross international reserves (GIR) are forecast to stay at a range of $99 billion to $100 billion, which are adequate to cover our import requirements for over seven months. It is seen rising to $102 billion in 2024.
There is room for improvement in the export sector, which has been in the doldrums this year because of weaker global demand. Hopefully, our electronics sector will rebound in the coming months to meet the demand of the growing electric vehicle industry and the rapid rise of the artificial intelligence (AI) technology that would require faster computer chipsets.
But the key to propping up the export sector is finding more niche markets for our tropical fruits, such as bananas, pineapple and mangoes. Australia recently welcomed a new shipment of Philippine mangoes, which could open more opportunities for our exports.
Hopefully, we could also ship more high-value crops to more nations to lift the income of Filipino farmers and reduce their reliance on subsistence crops. The adoption of free trade agreements like the one President Ferdinand Marcos Jr. signed with South Korea will give us more markets to explore.
Stronger exports will help narrow our BOP and current account deficits and provide more livelihoods to farmers, fishers and manufacturers.
While GDP growth is expected to moderate this year from a record 7.6 percent in 2022, it remains very respectable given the external challenges coming from the pandemic. It is still one of the fastest-expanding economies in the world—and I’m sure economists and analysts will find our growth narrative worth retelling.