The global economic slowdown will not significantly impact the Philippine economy which relies more on domestic demand as the main driver of growth, economists from First Metro Investment Corp. and the University of Asia and the Pacific said in a joint report over the weekend.
“Domestic demand, which expanded by 9.5 percent year-on-year in Q3-2022, has continued recent economic gains. We don’t expect a deep slowdown in consumer spending, and we think investment spending, especially on infrastructures and capital goods should accelerate in 2023,” the economists said in the December issue of the Market Call.
International Monetary Fund chief Kristalina Georgieva earlier warned that the chance of global growth dropping below 2 percent, was one-in-four.
The IMF predicted that more than a third of the global economy would shrink in 2022 or 2023, with the United States, European Union and China stalling.
First Metro and UA&P economists said, however, that aside from strong consumer spending, the Philippines could benefit from recently-enacted economic reforms, including the amendments to the Public Service Act that encourages foreign investors to go into power, airports and other infrastructures with 100-percent equity.
“The economic reopening will likely continue in the fourth quarter and in 2023 and coupled with the peso depreciation even at current levels [some 14 percent year-on-year in November], we do not expect a sharp slowdown in GDP growth. Manufacturing PMI for November still shows expansion,” they said.
Economists said the record employment levels would remain in the fourth quarter of 2022, but could ease seasonally after Christmas.
“Employment will likely slow down in January after the Christmas season ‘revenge’ spending, but will remain above the first half of 2022 levels, sufficient to keep consumer spending robust,” they said.
Results of the October 2022 Labor Force Survey showed that unemployment rate fell 4.5 percent, lower than the 7.4-percent outturn a year ago and 5.3 percent in January 2020 or pre-pandemic.
The Philippine Statistics Authority said 2.2 million individuals were unemployed in October, a 36-percent decline or around 1.3 million fewer than the 3.5 million jobless individuals in October 2021.
The economy expanded by 7.6 percent in the third quarter, faster than 7 percent a year ago, bucking the domestic and external headwinds in the period such as the rising interest rates, elevated inflation and geopolitical tensions in Eastern Europe.
This brought the average expansion in the first three quarters to 7.7 percent, surpassing the target range of 6.5 percent to 7.5 percent set by the government. The last time the economy grew by 7.7 percent in the first three quarters was in 2010.
Economists said that while inflation reached a 14-year high of 8 percent in November, it might ease to around 6 percent in the first quarter of 2023 and below that number by the succeeding quarter on lower crude oil and commodity prices.