THE MONTH of December usually bestows hope and cheer among Filipinos who celebrate what is probably the longest Christmas season in the world.
From an economic standpoint, this month also has the biggest contribution to the gross domestic product because of the pent-up demand for goods and services, made possible by increased income and bonuses, higher remittances from overseas Filipinos and bountiful harvests.
I sincerely believe that the buzzing business activities in the fourth quarter, especially in December, will make up for the lag in economic growth in the early parts of 2023.
I share the government’s optimism that the low end of the gross domestic product growth target range of 6 percent to 7 percent remains within reach. To achieve that, we need to a register a growth of at least 7.2 percent in the fourth quarter, following the average expansion of 5.5 percent in the first three quarters.
The 5.5-percent growth in the first three quarters, however, is not something we should be concerned about, given the challenging global environment when it was achieved. The economy did not “underperform”—it in fact exceeded the expectations of many analysts.
Remember that supply chain issues triggered hyperinflation in many countries, forcing central banks to bump up interest rates. Here, the Bangko Sentral ng Pilipinas raised its benchmark interest rate by a total of 450 basis points from just 2.0 percent in May 2020 to 6.50 percent today.
Yet, we continue to thrive in this environment. Other countries are not as fortunate. GlobalData Plc., a London-based data analytics company, predicts the global real GDP growth would reach only 2.4 percent in 2023 and 2.0 percent in 2024 amid inflation concerns from rising energy prices and escalating geopolitical crises.
Its 2023 growth forecast for Asia Pacific region is 3.7 percent, faster than 2.1 percent for the Americas and 0.9 percent for Europe. Per GlobalData’s analysis, geopolitical tensions, subdued demand and stringent monetary policies pose challenges to global trade.
Thus, we should be cheerful about how the Philippine economy is performing in this environment. The government is doing its part by hiking public investments in infrastructure and social services, while wooing more foreign companies to invest in the country.
With inflation on a downtrend and the foreign exchange rate stabilizing at around P55.5 per $1, companies are now more confident in placing their money in the local market. If there is predictability in the market, enhanced by positive economic outlook, the private sector will be encouraged to bet on the Philippines.
What also drives economic growth in the Philippines is the growing labor force of young Filipinos who fuel household spending and support demand for goods and services. Together, our spending prowess has been on the rise since the height of the pandemic in 2020 and 2021.
S&P Global, one of the major credit rating agencies, forecasts that the GDP per capita in the Philippines will reach about $3,903 in 2023 and rise to $4,273 by 2024. “Real GDP per capita growth could average about 4.4 percent per year over 2023-2026,” it says.
Our economic managers expect the Philippines to join the ranks of upper middle-income nations by 2025. S&P Global Market Intelligence looks further ahead, saying the Philippines is on its way to becoming a one-trillion-dollar economy within a decade.
The Asean+3 Macroeconomic Research Office (AMRO), an organization that watches the 10 members of the Association of Southeast Asian Nations (Asean), along with China, Japan and Korea, says economic recovery in the Philippines is expected to remain robust amid high inflation and weaker external demand.
AMRO says despite weaker external demand, the growth momentum is expected to be sustained by resilient household consumption reflecting an improving labor market, lower inflation, robust overseas remittances and higher government infrastructure spending.
S&P Global also expressed confidence on the potential of the Philippines, when it affirmed the country’s (‘BBB+’) long-term and (‘A-2’) short-term sovereign credit ratings with a stable outlook. “The stable outlook reflects our expectation that the Philippine economy will maintain healthy growth rates and the fiscal performance will materially improve over the next 24 months,” S&P Global says in its latest country report.
S&P Global believes while slower growth in China and the US will drag down domestic growth, the performance of the Philippines should be well above the average for peers at a similar level of development, on a 10-year weighted average per capita basis. “The country has a diversified economy with a strong record of high and stable growth. This reflects supportive policy dynamics and an improving investment climate,” it says.
Based on these statements from international organizations that dutifully monitor global economic prospects, I am confident that we have enough reasons to be cheerful about this month and in the coming years./PN
