The World Bank on Monday reduced its 2023 growth forecast for the Philippines to 5.6 percent from the 6-percent estimate it made in June amid the elevated inflation and global economic slowdown.
“GDP growth in the Philippines is projected to moderate to 5.6 percent in 2023 from 7.6 percent in 2022 due to still-elevated inflation, tight financial conditions and a weak external environment,” said Ergys Islamaj, WB senior economist for East Asia and Pacific during the bank’s East Asia and Pacific Economic Update online briefing.
Islamaj said growth was projected to edge up to 5.8 percent in 2024, although slower than the previous estimate of 5.9 percent.
World Bank East Asia and Pacific chief economist Aaditya Mattoo said the big concern for most of the economies in the region was the slowing global growth. “So our projections [for the Philippines] reflect the slowing global growth [that] has slowed down financial conditions,” Mattoo said.
“The good news for the Philippines is we expect the economic activity to be supported by domestic demand to be led by private consumption and decelerating inflation,” Mattoo said. Economic reforms implemented by the government would make it easier for foreign investments to come that would contribute to future economic growth.
Inflation peaked at 8.7 percent in January 2023 but eased in the succeeding months. The August inflation, however, picked up to a two-month high of 5.3 percent, bringing the average in the first eight months to 6.6 percent, above the target range of 2 percent to 4 percent.
The Philippine economy grew by 5.3 percent in the first half this year, below the government’s target range of 6 percent to 7 percent after a lackluster 4.3 percent in the second quarter.
Finance Secretary Benjamin Diokno said over the weekend the interagency Development Budget Coordinating Committee—composed of the heads of the Department of Finance, Department of Budget and Management, and the National Economic and Development Authority—would meet this month to review the economy’s performance in the first half.
Diokno said a revision of the targets might be considered.
The World Bank said growth in developing East Asia and Pacific would remain strong at 5 percent in 2023 but would ease in the second half. Growth is forecast to be 4.5 percent in 2024.
Improving external conditions will help growth in the rest of the region in 2024, but persistent domestic difficulties in China—the fading of the bounce back from the re-opening of the economy, elevated debt, and weakness in the property sector, structural factors such as aging—will weigh on growth in China to 4.4 percent.
The bank said the growth of foreign direct investment in services exceeded that in manufacturing by a factor of five in China, Indonesia, Malaysia, the Philippines and Thailand.
“The diffusion of digital technologies and services reforms are improving economic performance. In the Philippines, the adoption of software and data analytics by firms increased the productivity of firms by 1.5 percent on average over the period 2010-2019,” it said.