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Despite the pressure on emerging markets due to rising interest rates and inflation, the Philippines GDP for 2022 came back at their strongest in four decades.
The archipelago registered an annual growth of 7.6%, the highest since 1976 and above the official government target of 6.5% – 7.5%. A Reuters poll had expected the country to report fourth-quarter growth of 6.5%, whereas the official figure stands at 7.2%.
What helped Philippines GDP growth?
The economic growth in the Southeast Asian country received a boost from pent-up demand, even as inflation is at its highest since 2008 and interest rate hikes are rising. The government expect the Philippines GDP for 2023 to keep growing at about 7%, as mentioned by President Ferdinand Marcos Jr.
“The improvements in labour market conditions, increased tourism, revenge and holiday spending, and resumption of face-to-face classes supported growth in the quarter, further reflecting a solid rebound in consumer and investor confidence in the economy,” Arsenio Balisacan, secretary at the National Economic and Development Authority, said during a press briefing.
The main triggers for growth were wholesale and retail trade, auto repair, manufacturing, and construction. Household consumption grew at 8.2% in 2022, despite the rise in inflation climbing to 5.8% during the year.
Balisacan said the government has pledged support for consumers and other sectors by reducing tariffs on various products, and reduction of transport and logistics costs, among other things.
However, it remains to be seen if the Philippines GDP growth will sustain in 2023.
“We think 2023 will be a difficult year for the Philippines’ economy. On domestic front, initial boost from pent-up demand will start to fade in the coming quarters. At the same time, although easing, elevated inflation will continue to strain real purchasing power. Slowdown in the global economy will also weigh on goods exports, which in turn will weigh on investment appetite of export-oriented manufactures,” as per Makoto Tsuchiya, Assistant Economist at Oxford Economics.
The higher growth could also mean that the central bank has more room for monetary policy tightening.
“Inflation, although close to peak, remains well-above target and could prove to be sticky over the coming months. BSP Governor Medalla hinted at possible rate hikes at the March meeting but has remained non-committal to hiking past 6% for the remainder of his term as Governor,” says ING.
