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The Philippines recorded year-on-year GDP growth of 6.4% in the first quarter of 2023. Although the growth was the slowest in two years due to mounting inflation and interest rates, it surpassed the estimates by market analysts, thanks to resilient post-pandemic demand.
However, growth slowed to 1.1% during the first quarter from 2.4% in the previous quarter. Bangko Sentral ng Pilipinas (BSP), the country’s central bank, has raised the key interest rate by 425 basis points since May 2022. It previously said it will consider the first-quarter GDP data and inflation numbers before deciding on monetary policy on May 18. BSP Governor Felipe Medalla hinted at the possibility of being open to pausing the central bank’s tightening cycle.
The Southeast Asian country’s headline inflation slowed down for the third consecutive month in April to 6.6% from 7.6% in March, which brought the average inflation rate of the January-April period to 7.9%.
What aided Philippines GDP growth?
The Philippines GDP numbers were aided by a 6.3% rise in household consumption, growth in which has now slowed for the fourth consecutive quarter. Wholesale and retail trade saw a growth of 7% while financial and insurance activities rose 8.8%.
The archipelago’s major economic sectors also showed growth: the agriculture, forestry and fishing sector grew 2.2%, industry 3.9% and services 8.4%. Exports of goods and services had a slight growth of 0.4%, while imports grew 4.2%.
On the other hand, the unemployment rate in March declined from 4.8% to 4.7% as the Philippine economy slowly recovers from the pandemic. The gross national income rose by 9.9% and the net primary income from the rest of the world* grew by 81.2% during the first quarter.
“The Philippine economy managed to expand faster than most had anticipated but the 6.4% gain could be the high for the year given lingering headwinds. We expect GDP to remain in expansion mode for the rest of the year, although we are bracing for a likely slowdown as the triple threat of high inflation, elevated borrowing costs and rising debt levels weigh on momentum,” as per Nicholas Mapa, Senior Economist, Philippines, ING.
Outlook for the Philippine Economy
The Philippines is an emerging economy that has seen steady growth due to the inflow of foreign direct investment and remittances. Apart from being a strong industrial sector in terms of manufacturing electronics for overseas corporations, the archipelago is rich in natural resources such as nickel, copper, chromite, oil and coal.
The ASEAN country experienced a full-year growth of 7.6% last year, which is the fastest in almost half a century. Even if the odds to replicate such a feat this year are low, the first-quarter numbers bring Philippines’ GDP growth closer to the government target of 6% to 7% in 2023.
Arsenio Balisacan, secretary of the National Economic and Development Authority, pointed toward the conflict between Russia and Ukraine as well as tensions in the South China Sea and the Taiwan Strait as major risks to the country’s growth outlook.
* remittances by Filipinos working abroad.
– reporting by Jovan Thomas
