Finance Secretary Benjamin E. Diokno expects the Philippine economy would grow faster than expected this year due to surging manufacturing and construction sectors, as well as strong domestic demand.
In a commentary released on Wednesday, Dec. 28, Diokno said the country’s economy, as measured by its gross domestic product (GDP), likely surpassed the 6.5 percent to 7.5 percent target range in 2022.
“All things considered, the Philippines did very well in 2022,” Diokno told reporters. “All sectors will be surging, led by manufacturing and construction, while strong domestic demand is supplemented by exports.”
Diokno said employment rate, a key metric in a labor-rich country, was favorable, citing it has exceeded pre-pandemic levels that created some 4.6 million new employment.
He also noted that the manufacturing sector is one source of optimism.
The S&P Global Philippines manufacturing purchasing managers' index has mostly been on an expansion mode, reaching 52.7 percent index points in November.
Jobs in the manufacturing sector increased by 10.42 percent in October 2022 year-on-year as improved sales signaled business expansions and higher capacity use.
“The expanded job creation is a sign of future growth prospects for the sector. Looking ahead, output expectation in the next 12 months remains optimistic with hopes of demand expansions,” Diokno said.
He added that the other source of optimism is employment with the jobless rate sliding to 4.5 percent from 5.3 percent during the pre-pandemic period.
“There were 4.6 million new jobs in October 2022 compared to the level posted during the pre-pandemic period. Underemployment rate in October 2022 (14.2 percent) was lower than the January 2020 pre-pandemic period (14.8 percent),” the finance chief said.
However, Diokno admitted that inflation, which has been a challenge for almost all countries—both developed and emerging—has been a major concern for Philippine authorities too.
But for the Philippines, he said the outlook is that inflation will start to ease next year and will be within the target band of 2.0 percent to 4.0 percent by 2024.
“This positive prediction is based on the very close coordination between monetary and fiscal authorities and the falling prices of oil and related commodities,” he explained.
On oil prices, which is major source of imported inflation, Diokno said they have gone back to levels before the Russia-Ukraine conflict amid worries over global demand outlook.
“Rising COVID cases and the strict quarantine measures in China have had dampening effects on crude oil prices and other energy commodities,” Diokno said.
“In brief, the oil futures market remained in backwardization as of 29 November 2022, owing to weak demand due to production disruptions in China, tighter global financial conditions, and deteriorating world growth prospects,” he added.