Private sector economists expressed optimism the Philippine economy will grow above 6 percent in 2023 on faster infrastructure spending, coupled with the expected slower inflation in the latter part of the year that will spur robust consumption.
Economists from First Metro Investment Corp. and the University of Asia and the Pacific said in a joint report GDP growth would decelerate to 5.8 percent in the second quarter from 6.4 percent in the first quarter.
“GDP growth may slow mildly to 5.8 percent year-on-year in the second quarter as elevated inflation constrains consumer spending,” they said.
They said strong gains in construction were expected due to accelerating infrastructure work, and revenge spending on transport and storage and accommodation and food services on the services sector space.
“With these gaining further traction in the second half and sharply lower inflation rates to average 3.3 percent by the fourth quarter, we see a return to above-6 percent full-year growth in 2023,” they said.
Higher inflation caused a 6.4-percent slowdown in GDP growth in the first quarter, which was comparatively slower than 8 percent a year ago and 7.1 percent in the fourth quarter of 2022.
Inflation reached its peak at 8.7 percent in January 2023, before easing to 8.6 percent in February, 7.6 percent in March and 6.6 percent in April. This brought the average in the first four months to 7.9 percent, above the target range of 2 percent to 4 percent.
“The services sector will continue to lead growth amid the end of the pandemic. Major contributors would be the transportation and storage, and accommodation and food services sub-sectors, as more Filipinos eat out and revenge tourism [both local and foreign] expands further,” the economists said.
“The construction sub-sector under Industry should take pole position in the growth race as major infrastructure works [e.g., Metro Manila Subway, North-South Commuter Rail, South Expressway Extension] and key PPP projects take on a faster pace,” they said.
“These large contributors to employment and slower inflation should combine to power more robust consumer spending, heretofore hindered by elevated inflation,” the report said.
“Headline inflation will likely continue to fall averaging 6.3 percent in Q2 when it breaks through the 6 percent floor by June and we expect this to average 3.3 percent in Q4, well within the BSP’s target range of 2 percent to 4 percent,” they said.