The economy grew by 6.4 percent in the first quarter of 2023, slower than 8 percent a year ago and 7.1 percent a quarter ago amid the persistent high inflation that affected consumption, the Philippine Statistics Authority (PSA) said Thursday.
National statistician and civil registrar general Dennis Mapa said in a press briefing the 6.4 percent GDP growth in the first quarter was the lowest growth registered after seven quarters when the country started to recover from the pandemic in the second quarter of 2021.
On the other hand, Economic Planning Secretary Arsenio Balisacan said the Philippines grew the fastest in the region during the period and it should not be considered a slowdown coming from a low base.
“Among major emerging economies in the region that have released their first-quarter 2023 real GDP growth so far, the Philippines grew the fastest, followed by Indonesia [5 percent], China [4.5 percent], and Vietnam [3.3 percent],” he said.
“The country’s growth is also more rapid than the forecast first quarter-growth rates for Malaysia [4.9 percent], India [4.6 percent], and Thailand [2.8 percent],” Balisacan said.
President Ferdinand Marcos Jr. said the administration is on the right track to sustain the country’s strong economy, noting the government’s resolve to bring more job and investment opportunities is already within reach.
“Our goal is to have a robust economy that will lead to the creation of more jobs and more opportunities for businesses and investments),” Mr. Marcos said in Filipino in a Facebook post.
“It is already within our reach, given the continued increase in our GDP growth rate which now stands at 6.4 percent in the first quarter of 2023,” he added.
Mr. Marcos also expressed elation that the Philippines even surpassed the growth rate posted by Indonesia, China, and Vietnam in the same period.
Despite this rather auspicious beginning for 2023, Balisacan said the economic team and the whole government must remain vigilant, especially with the persistent elevated inflation rate.
“High inflation remains a challenge, and the Bangko Sentral ng Pilipinas’ move to raise its key policy rates to anchor inflation expectations and ensure price stability, may dampen future growth. But the improvement in business climate can counter this unintended effect,” Balisacan said.
Inflation hit a 14-year high of 8.7 percent in January 2023 after surpassing the target range last year. Inflation eased to 8.6 percent in February, 7.6 percent in March, and 6.6 percent in April but remained high over the target range.
Baliscan said the latest inflation report numbers looked “promising.” Food inflation declined from 9.5 percent in March to 8 percent in April 2023, while non-food inflation declined from 6.3 percent in March 2023 to 5.5 percent in April,” he said.
Finance Secretary Benjamin Diokno expressed confidence that the economy will achieve the growth target of 6 to 7 percent this year.
“As we continue to rely on domestic demand to propel the economy towards the growth target, the government remains unwavering in protecting the purchasing power of Filipino consumers by acting swiftly to implement direct measures against inflation,” Diokno said.
On the fiscal side, Diokno said the government will continue the implementation of the government’s infrastructure development program, which is set at 5-6 percent of GDP annually as indicated in the Medium-Term Fiscal Framework. The MTFF is the blueprint to reduce fiscal deficit, promote fiscal sustainability and enable robust economic growth.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said one of the surprise economic growth drivers in the period are the lower individual income tax rates implemented since January 2023 for most income brackets that increased take-home pay by about 3 percent to 5 percent as part of the TRAIN Law.
“This could lead to increased consumer spending, which accounts for at least 75 percent of the economy and, in turn, lead to faster economic growth,” Ricafort said. He said this could also help ease the adverse effects of higher inflation recently.
Ricafort said the measures to reopen the economy towards greater normalcy that led to increased sales and revenues, livelihood, employment, and other business activities somewhat overshadowed the risks of higher inflation, and higher interest rates amid the aggressive Fed rate hikes and local policy rate hikes in recent months.
“Thus, on the balance, the Philippine economy has already been back to prepandemic levels in peso terms at both current prices and constant 2018 prices (after two lost years due to COVID),” Ricafort said.
PSA said wholesale and retail trade; repair of motor vehicles and motorcycles, grew by 7.0 percent; financial and insurance activities, 8.8 percent; and other services, 36.5 percent.
Major economic sectors, namely agriculture, forestry, and fishing; industry; and services all posted growth in the first quarter of 2023 with 2.2 percent, 3.9 percent, and 8.4 percent, respectively.
On the demand side, household final consumption expenditure grew by 6.3 percent in the first quarter of 2023. Government final consumption expenditure (GFCE) rose 6.2 percent; gross capital formation rose 12.2 percent; exports of goods and services was up 0.4 percent; and imports of goods and services climbed 4.2 percent.
Earlier, the inter-agency Development Budget Coordination Committee maintained its previous growth forecast for the economy at 6 to 7 percent this year despite the headwinds associated with geopolitical tensions, higher interest rates and elevated inflation.
DBCC—composed of the secretaries of the Department of Budget and Management, Department of Finance, and the National Economic and Development Authority—expressed optimism that the high-growth performance would continue until 2028.
The Philippine economy grew by 7.6 percent in 2022, outperforming the DBCC’s growth target of 6.5 to 7.5 percent.
Budget Secretary Amenah Pangandaman said the first quarter performance was “outstanding.”
“With all these data coming in, I can say that the Philippines’ 6.4 percent is actually outstanding. It would be excellent if it reached 7 percent, but 6.4 percent, or even 6 percent, is already outstanding,” Pangandaman said in a statement.
Pangandaman said the latest expansion in the economy is an indication that the country now has a “dynamic domestic economy.”
“This means that even if the regional and global economic environment would worsen, ours has its own momentum and own dynamism to sustain growth,” she added.
Balisacan tried to play down the possible blow of the El Niño phenomenon to the country’s economy.
“We have experienced El Niño before and are confident that with adequate planning and preparation, we can successfully navigate it again this year,” Balisacan said at a press briefing.
“During strong El Niño years, rice production could decrease by double digits. I think the highest we recorded was something like 20%,” he said.
“But slight El Niño could cause agriculture production to decrease by 1 to 2 percent,” the NEDA chief added.
Balisacan said while agriculture contributes about 10 percent to the GDP, 20 percent of the workforce is dependent on agriculture.
Thus, he said, the “social implications are more serious than the economic ones.”
“The other part of El Niño is the supply of electricity, some of our power plants are dependent on dams. It could affect the availability of power,” the secretary said.
“I think we’ve learned much from El Niño management,” he said.
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