THE PHILIPPINES will find it difficult to match its performance in 2022, but growth of 5.5% to 6.5% in 2023 will still stand out in the context of a slowing global economy, a senior legislator said.
At an economic briefing hosted by the Management Association of the Philippines, Albay Rep. and House ways and means committee Chairman Jose Maria Clemente S. Salceda said: “More likely than not, growth will be within 5.5% to 6.5% — which is still an overwhelmingly positive performance. The global tide is lower, but we will still be on top.”
He said the economy in 2023 will be driven by strong consumer demand but tempered by high inflation and rising interest rates.
Mr. Salceda’s forecast range falls within the government’s official projection of 6-7% gross domestic product (GDP) growth.
The economy grew 7.2% year on year in the three months to December, bringing the full-year expansion to 7.6%, exceeding the government’s 6.5-7.5% target.
“The key headwind will be inflation, which could dampen consumer spending and erode wages. Although 2023 inflation will be lower than 2022, food inflation appears entrenched — with overall inflation unlikely to reach the 2-4% inflation target this year,” Mr. Salceda added.
Inflation was at a 14-year high in January as food prices continued to spike, rising to 8.7% last month from 8.1% in December and 3% a year earlier.
The January reading was the highest since the 9.1% posted in November 2008. It also marked the 10th consecutive month inflation exceeded the Bangko Sentral ng Pilipinas (BSP) 2-4% target band.
On the sidelines of the event, Mr. Salceda told reporters that he expects inflation to average 5% this year, higher than the BSP’s 4.5% forecast for 2023, and expects further rate hikes from the central bank.
“They have no choice but to raise interest rates. It’s really with respect to business and consumer expectations. It’s about curtailing inflation expectations from impinging on the behavior of both consumers and producers,” Mr. Salceda said.
“With the Fed remaining committed to rate hikes at a milder pace, and with inflationary forces, especially food and fuel, being entrenched, expect BSP to continue raising rates by at least 75 to 100 bps (basis points) in 2023,” he added.
The Monetary Board raised rates by 350 bps last year, bringing its benchmark policy rate to a 14-year high of 5.5% from a record low starting point of 2%, as it sought to tame inflation.
The Monetary Board is scheduled to meet on Feb. 16 for its first policy meeting this year.
Meanwhile, World Bank Operations Manager for Brunei, Malaysia, the Philippines and Thailand Achim Fock likewise said elevated inflation and corresponding increases in policy rates are among the downside risks in the growth outlook this year.
“The growth outlook is subject to downside risks at the time when the authorities face a challenging task of supporting recovery while taming inflation. The synchronous monetary tightening in many central banks could produce larger impacts than intended, both in tightening financial conditions and deepening the growth slowdown,” Mr. Fock said.
He also said that monetary tightening is appropriate to address inflation, but non-monetary measures are also warranted.
“Staying the course on fiscal consolidation amid clamor for more fiscal support is also recommended. Targeted support is better than blanket support,” he said.
“Addressing the immediate challenge of elevated inflation, staying the course on fiscal consolidation, sustaining investments in health and education, and reversing the low agriculture productivity will be key to safeguard growth and achieve long term development goals,” he added.
The World Bank sees Philippine economic growth at 5.4% in 2023 before rising to an average of 5.9% in 2024-2025. — Keisha B. Ta-asan