Strong consumer spending fueled expansion, fastest pace in 46 years
Economic growth beat expectations last year, expanding to its fastest pace in 46 years on the back of strong consumer spending despite rising inflation, officials said Thursday.
Gross domestic product (GDP), or the value of goods and services produced by the country, expanded 7.6 percent in 2022, the Philippine Statistics Authority (PSA) said in a briefing, faster than the pandemic-blighted 5.7 percent output in 2021.
The reading topped the government’s target growth of 6.5 percent to 7.5 percent.
“There was so much pent-up demand… and that significantly improved economic activities,” Socioeconomic Planning Secretary Arsenio Balisacan said in a briefing.
“We are confident that we will remain in our high growth trajectory,” he added.
The full-year economic performance was also the Philippines’ best since 1976, according to official data.
Growth in the last three months of the year also beat expectations, expanding 7.2 percent against a 6.6 percent median estimate in a Bloomberg survey of economists.”The improvements in labor market conditions, increased tourism, revenge and holiday spending, and resumption of face-to-face classes supported growth in the quarter,” Balisacan said.
Agricultural production, however, grew just half a percent last year, barely contributing to the overall output.
Consumer spending weathered rising inflation as pent-up demand to spend in restaurants and entertainment as well as more jobs fueled domestic demand, Balisacan said.
“Clearly, if not for the high inflation and elevated prices during this period, growth could have been higher,” Balisacan said.
Inflation hit 8.1 percent in December, the fastest in 14 years, prompting the central bank to aggressively raise interest rates.
Inflation stood at 5.8 percent for the full year, above the bank’s target.
Balisacan said keeping commodity prices in check and ensuring food security are at the top of the government’s priorities “as global and domestic headwinds persist.”
Balisacan said the reopening of the Chinese economy would be a boost to the domestic economy in the months ahead.
“We export to China and we also import from China. With the improving mobility in China, it will also benefit our tourism sector,” Balisacan said.
Officials are aiming for growth of 6-7 percent this year amid fears of a global economic slowdown.
“That is a very respectable growth for the Philippine economy if we achieve that,” he said.
The higher-than-expected growth could give the central bank “space to tightening policy further,” ING senior economist Nicholas Mapa said.
“Inflation, although close to peak, remains well-above target and could prove to be sticky over the coming months,” Mapa said.
National statistician and civil registrar general Dennis Mapa said in an online briefing the economy gained mainly from the strength of the industry and services sectors.
The industries that contributed the most to the annual growth were wholesale and retail trade; repair of motor vehicles and motorcycles, 8.7 percent; manufacturing, 5.0 percent; and construction, 12.7 percent.
The main contributors to the fourth quarter 2022 growth were wholesale and retail trade; repair of motor vehicles and motorcycles, 8.7 percent; financial and insurance activities, 9.8 percent; and manufacturing, 4.2 percent.
But agriculture, forestry, and fishing posted a contraction of -0.3 percent.
On the demand side, household final consumption expenditure grew by 7.0 percent in the fourth quarter of 2022. Government final consumption expenditure, 3.3 percent; gross capital formation, 5.9 percent; exports of goods and services, 14.6 percent; and imports of goods and services, 5.9 percent were other sources of growth for the quarter.
The gross national income grew by 9.3 percent in the fourth quarter of 2022 and by 9.9 percent for the full year. Net primary income from the rest of the world grew by 57.5 percent during the fourth quarter and by 76.4 percent for 2022.
Rizal Commercial Banking Corp. chief economist Michael Ricafort told Manila Standard that the bright spots for the economy going forward would be the sustained strength of remittances, exports recovery, lower unemployment rate, manufacturing, foreign direct investments, and expansion of bank lending.
GDP growth could average about 6 percent to 7 percent in 2023, Ricafort said.
President Ferdinand Marcos Jr.’s good economic stewardship resulted in the country’s 7.6 percent full-year growth in 2022.
Department of Budget and Management (DBM) Secretary Amenah Pangandaman said the latest GDP figures validate the government’s economic strategies, and shows that the administration is on track with its “Agenda for Prosperity.”
Speaker Martin G. Romualdez said the country could remain on the high economic growth path and could even improve its 7.6-percent full-year expansion last year.
“With the right policies that will continue to implement President Marcos’ Agenda for Prosperity roadmap, and with the existing close cooperation between the executive and legislative branches, we can build on our stellar economic performance,” Romualdez said.
“Under the able leadership of the President, the nation’s GDP has been above 7 percent for the first six months of his term. His decision to reopen the economy despite the pandemic boosted growth,” he said. With AFP (See full story online at manilastandard.net)
He called on Congress to continue supporting the Agenda for Prosperity with the needed legislation, including the bill to create the Maharlika Investment Fund, a sovereign wealth fund.
“The enactment of these proposed pieces of legislation will further enhance our economic performance,” he said.
Albay Rep. Joey Sarte Salceda said he is bullish about the prospects this year, despite fears of a global economic slowdown.
Salceda, chairman of the House committee on ways and means, said “the best is yet to come.”
He pointed to the growth in gross capital formation as a reason for optimism.
“Businesses, in other words, are investing – and their expenditures for those investments are reflected well on the figures,” he said.
Gross capital formation grew by 16.8 percent year-on-year, according to the PSA’s estimates.
“That bodes very well for 2023 and beyond,” Salceda said. “That means the business sector is optimistic about the need for more production in the coming years. Don’t bet against the Philippines in 2023.”
Salceda is also seeing “a sliver of hope in the agriculture sector.”
“Last year saw negative growth in breeding stocks and orchard development. That figure is now a very slight positive, at 0.3 percent,” he said.
Salceda also pointed out that the energy sector appears to have some momentum based on the figures.
Senate President Juan Miguel Zubiri welcomed the news of the country’s GDP growth as “a remarkable success” and proof that the country’s pandemic recovery efforts are working.
“We would not have seen this growth without the Marcos administration’s clear economic targets, and their strong push to sell the country as an investment hot spot,” he said.
But Senate Minority Leader Aquilino Pimentel III said GDP and other economic figures were simply numbers to most Filipinos.
“What is more important is the distribution of the benefits of economic growth to the people, especially the poor,” he said.
He said the improved economy should lead to more taxes paid by the rich.
“And then, we should use this increase in tax revenue to invest in our people’s education, skills, and welfare and to increase investments in relevant public infrastructure,” he said.
Senator Juan Edgardo Angara said the 7.6 percent growth in GD showed that the economy has bounced back after the historic slump brought about by the COVID-19 pandemic.
“A lot more that must be done to sustain the growth momentum,” said the Senate finance committee chairman.
The Trade Union Congress of the Philippines (TUCP) welcomed the GDP growth but said the benefits of this growth are not yet fully felt by many, especially the poor and the families of minimum-wage earners.
To be fully meaningful, growth must be inclusive, the TUCP said, noting that the poor are feeling the surge in the prices of basic goods and services.
“We need to address these problems of surging inflation and low job quality,” the group said.