The economy likely expanded by 7.1 percent in the first quarter of 2023 despite the risks of elevated inflation and a slowdown in global growth, economists from First Metro Investment Corp. and University of Asia & the Pacific said in the April issue of the Market Call.
“We project robust GDP growth in Q1 at 7.1 percent year-on-year, albeit with downside risks. Big overall employment gains powered by the services sector should support consumer spending, besides the income tax cut and resilient OFW remittances,” they said in the report released Sunday.
“The most recent economic data caught our eye to justify optimism regarding Q1 economic expansion, albeit with a caution engendered by the world economy’s weakness and still elevated domestic inflation,” the economists said, referring to the improvement in the labor market, manufacturing and government spending.
“The 8.6-percent year-on-year jump in employment in February led by faster recovery of the services sector becomes more instructive when we consider that huge temporary employment for the May 2022 elections bloated year ago figures. The huge vault in business expectations should provide further backing to this,” they said.
Government spending on operating and capital outlays should accelerate starting March, according to the report.
The report said that apart from government and official development assistance-funded infrastructure projects like the Metro Manila Subway and North-South Commuter Line gaining traction, major PPP projects such as the NLEX-SLEX second connector elevated tollway, MRT-7 and Cavite-Laguna Expressway extension of LRT-1 to Cavite hurdled key obstacles.
The manufacturing sector also continued to show expansion both in terms of purchasing managers’ index and volume of production index in the first two months of the year. “The faster opening up of hotels and restaurants will help drive the sector,” they said.
Inflation should decline further to 6.2 percent year-on-year by June despite a renewed climb in prices of petroleum products. Easing food prices will likely offset the fuel price gains, according to the report.
Inflation surpassed the target range last year and reached a 14-year high of 8.7 percent in January 2023 before easing to 8.6 percent in February and 7.6 percent in March.
The economy grew by a 46-year high of 7.6 percent in 2022, faster than the 5.7-percent expansion in 2021. The economy gained mainly from the strength of the industry and services sectors.
National Economic and Development Authority Secretary Arsenio Balisacan earlier said he expected a better outlook for the economy, although much should be done to sustain the recovery from the COVID-19 pandemic.
The government targets an economic expansion of 6.5 percent to 8 percent from 2024 to 2028.