The ASEAN+3 Macroeconomic Research Office (AMRO) said Monday the Philippines’ tightened macro policies and infrastructure investment would address high inflation and structural challenges.
AMRO’s assessments were contained in the 2023 Annual Consultation Report on the Philippines published Monday. The report was based on AMRO’s annual consultation visit to the Philippines from Aug. 29 to Sept. 8, 2023, with data and information available up to Nov. 9, 2023.
AMRO said in the short term, the impact of high inflation on the economy remained the key concern.
“Growth is forecasted to moderate to 5.6 percent in 2023 from a multi-decade high of 7.6 percent in 2022, and to pick up to 6.3 percent in 2024 as external demand recovers. Headline inflation is expected to rise from 5.8 percent in 2022 to 6.0 percent in 2023 and then moderate to 3.6 percent in 2024, within the 2–4 percent inflation target,” it said.
Inflation remained high in 2023, driven by buoyant demand and supply shocks. AMRO said the high core inflation reflected elevated inflationary pressure due to a positive output gap and the second-round effects from increases in the minimum wages and persistently high inflation expectations.
Meanwhile, economists from First Metro Investment Corp. and University of Asia & the Pacific said in the latest issue of The Market Call that government spending would continue improving in the fourth quarter.
“NG [national government] spending in Q4 should remain robust despite the concern of the Department of Budget and Management to keep the lid on the debt-to-GDP ratio,” they said.
The economists said the GDP growth of 5.9 percent in the third quarter and the easing of headline inflation to 4.9 percent in October against the market expectations of 5.6 percent were two major positive surprises that emerged in early November 2023.
“Consumer spending, which remained a solid base for growth as it increased by 5 percent year on year, should improve further in the fourth quarter as inflation recedes. Moving forward, the latter should continue as weak crude oil prices [even in futures market] should offset a possible further increase in rice prices due to El Nino,” the economists said.
They said the peso-dollar rate should temporarily appreciate as OFW remittances bulk up in December. “All told, while the possibility of a slightly slower GDP uptick in Q4 exists, full-year growth should hold at 5.8 percent, which still exceeds most forecasts,” they said.
Finance Secretary Benjamin Diokno earlier expressed confidence the economy remained firmly on the path to recovery and progress, as evidenced by its solid economic performance in the first three quarters of the year.