The Philippine economy may grow between 5.5 percent and 6.5 percent in the next decade because of the strong macroeconomic fundamentals and reforms put in place by the previous and present administrations, an economist said Friday.
“Philippine economic growth estimate could normalize to around 5.5 percent to 6.5 percent in 2023 and beyond [next 5-10 years amid the country’s favorable demographics],” Rizal Commercial Banking Corp. chief economist Michael Ricafort said in his latest economic outlook report.
He said the majority of the population of more than 110 million had been at working age since 2015. The absence of lockdowns—as what the government did in the past two years to prevent the spread of COVID-19 pandemic—would result in more economic and business activities, he said.
Ricafort noted the growth upside coming from the lower individual income tax rates starting January 2023 for most income brackets as part of the Tax Reform for Acceleration and Inclusion Law.
“This could lead to increased consumer spending, which accounts for at least 75 percent of the economy, and, in turn, lead to faster economic/GDP growth,” he said, adding this could also help ease the adverse effects of higher prices/inflation recently.
Ricafort said the measures to reopen the economy towards greater normalcy that led to increased sales, more jobs and other economic activities somewhat overshadowed the risks of higher inflation, higher interest rates, and weaker peso.
Inflation surged past the target range last year and accelerated further to a 14-year high of 8.7 percent in January.
“Thus, on the balance, the Philippine economy has already been back to pre-pandemic levels in peso terms at both current prices and constant 2018 prices… but offsetting challenges remain such as higher inflation in January 2023 at 8.7 percent, local policy rate at new 15-month high of 6 percent, debt-to-GDP ratio at 60.9 percent as of end-2022,” he said.
He underscored the need to bring the debt-to-GDP below the 60-percent threshold to help sustain the country’s relatively favorable credit ratings at 1 to 3 notches above the minimum investment grade that help support confidence in the country by international investors and creditors.
He also cited other important economic growth drivers for 2023 and beyond. These include the sustained inflow of remittances, recovery of exports, creation of more jobs, improved manufacturing and further increase in government spending.
“The delivery of more reform measures, especially fiscal reform measures and other economic reform measures that would help further ease limits on foreign ownership, would help attract the entry of more foreign investment such as the amendments to the Public Services Act, Retail Trade Liberalization Act, Foreign Investment Act, CREATE Law, among others,” he said.
The GDP growth of 7.6 percent last year surpassed the upper end of the target range of 6.5 percent to 7.5 percent.
The interagency Development Budget Coordination Committee expects a slower growth of 6 percent to 7 percent in 2023.