The Philippines would not suffer a sharp economic slowdown next year due to strong domestic consumption, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in a joint report.
In the December issue of the Market Call, FMIC and UA&P said the ongoing global economic slowdown will not likely heavily impact the country’s gross domestic product (GDP) growth, since it relies more on domestic demand as its main driver.
“As we have stressed, domestic demand which expanded by 9.5 percent year-on-year in Q3-2022 has continued to recent economic gains. We don’t expect a deep slowdown in consumer spending,” the report said on Friday, Dec. 23.
Moreover, FMIC and UA&P said investment spending, which is expected to accelerate especially on infrastructures and capital goods will also support growth in 2023.
“The recently revised Public Service Act (PSA) has reduced what may be considered as ‘public utilities’ and encourages foreign investors to go into power, airports, and other infrastructures with 100 percent equity,” the report said.
While employment will likely slowdown in January after the Christmas season “revenge” spending, FMIC and UA&P said jobless rate will remain above the first-semester 2022 levels, sufficient to keep consumer spending robust.
Inflation is also seen to ease to around six percent in the first-quarter after hitting a 14-year high in November. FMIC and UA&P attributed this to weaker demand for crude oil and commodities amid global recession.
Earlier, Socioeconomic Planning Secretary Arsenio M. Balisacan said the economy’s growth performance this year is likely to surpass the government’s growth assumption for 2022.
The Development Budget Coordination Committee (DBCC) has set a target range of 6.5 percent to 7.5 percent for 2022. The country has already registered a 7.7 percent growth rate for the first three quarters of the year.
“Given the indications that we are seeing in the fourth quarter, it’s likely going to exceed even the upper limit of that range. We expect to see robust growth in the fourth quarter,” Balisacan told reporters.
The DBCC, however, recently revised downwards its growth assumption for 2023 as it considered global headwinds such as the slowdown in major advanced economies.
The 2023 GDP growth projection has been revised to six percent to seven percent, from the 6.5 to eight percent earlier assumption.
“We are aware of the global headwinds, particularly the very likely recession for many advanced economies and the persistence of the problems with the supply chain, particularly in relation to the ongoing war in Ukraine, and so there are still uncertainties there,” Balisacan said.