The Philippine economy weathered 2023’s global headwinds, marked by ongoing conflicts in Ukraine and the Middle East, elevated inflation and rising interest rates. Its gross domestic product (GDP) grew 5.9 percent in the third quarter, the fastest expansion in the Association of Southeast Nations (ASEAN).
Easing inflation
Inflation surged to 8.7 percent in January, threatening the government’s 2023 GDP growth target of 6 percent to 7 percent, but gradually declined due to “right monetary policy” measures, according to Bangko Sentral ng Pilipinas Governor Eli Remolona Jr.
The latest reading of 4.1 percent in November was the slowest since March 2022, though still above the government’s 2 percent to 4 percent target for the year.
Policy reforms
Finance Secretary Benjamin Diokno and National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan expressed confidence in the growth trajectory, citing progress in tax reforms like the Real Property Valuation and Assessment Reform Bill and the Passive Income and Financial Intermediaries Taxation Bill.
These reforms, along with others addressing digital services, sweetened beverages, junk food and single-use plastics, aim to improve tax administration, fairness and environmental sustainability.
Food prices
While overall inflation dipped, food prices remain a concern. Rice prices rose slightly in November, but declines in fish, meat, sugar, and vegetables helped offset the increase. The government implemented strategies to stabilize food supply, including maintaining lower tariffs on rice, corn, and swine meat, and providing support to farmers affected by El Niño.
Strong labor market
The Philippines’ unemployment rate fell to 4.2-percent, its lowest since April 2005. Investments in tourism-related and IT-BPO sectors contributed significantly to job creation, particularly in middle and high-skill occupations.
President Ferdinand Marcos Jr.’s recent signing of the Public-Private Partnership (PPP) Code is expected to attract further investments and fuel infrastructure development, potentially contributing to further economic growth.
The Maharlika Investment Fund (MIF) is also slated to play a role in financing key infrastructure projects, with initial investments focusing on urban areas with high return potential.
Risks remain
While optimistic, policymakers acknowledge potential risks. The Bangko Sentral ng Pilipinas (BSP) noted that higher transport charges, electricity rates and international oil prices could push inflation upward. The central bank remains vigilant, monitoring inflation expectations and second-round effects, and is prepared to adjust monetary policy if necessary to bring inflation back within its target range.
Overall, the Philippines has shown remarkable resilience in navigating challenging global conditions. With ongoing efforts to stabilize prices, boost food production, and attract investments, the country’s economic outlook remains promising.