File photo: This photo taken on January 29, 2019 shows a general view of the skyline of the financial district of Makati in Manila. (Photo by Ted ALJIBE / AFP)
The Philippine economy’s growth forecast for 2023 has been revised slightly downward by the OECD Development Center. While in March it was projected to grow at 5.7 percent, the forecast is now 5.6 percent. This adjustment is due to the expectation that high interest rates will dampen pent-up demand for goods and services. The first quarter of 2023 already showed a limited impact on the Philippine economy caused by higher inflation and borrowing costs from aggressive monetary tightening by the Bangko Sentral ng Pilipinas (BSP). Private consumption and investments were dragged down in subsequent months, leading to a weakening of the economy in the second quarter, with real GDP growth at 4.3 percent, the lowest in nearly 12 years.
In the second half of the year, the OECD Development Center expects government spending to be a key driver of Philippine GDP growth. Rebound is anticipated after a 7.1-percent contraction in the second quarter due to catch-up plans and frontloading of programs and projects.
Core Inflation
The research group also highlighted that, while headline inflation in the Philippines has been decelerating, core inflation remains elevated. Core inflation excludes volatile items like food and energy. Factors contributing to upward pressure on inflation include the potential impact of El Niño on agriculture output, wage increases in the urban sector, and the restrictive policy stance of the US Federal Reserve and the European Central Bank. The Philippine central bank is expected to maintain a high interest rate regime, which may further dampen GDP growth if pent-up demand eases.
The BSP expects monthly headline inflation to increase to around 5.2 percent, ending a six-month downtrend from 8.7 percent in January to 4.7 percent in July. – INQ
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Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
