Finance Secretary Benjamin E. Diokno, the government’s chief economic manager, expects the Philippine economy to grow by close to six percent this year.

The Philippine Statistics Authority reported on Thursday a better-than-expected gross domestic product (GDP) growth of 5.9 percent in the third quarter.

However, this still falls short of the government's target range of 6.0 percent to 7.0 percent for the first nine months of the year, with an average GDP growth of 5.53 percent.

To reach the lower end of the target, the local economy would need to expand by at least 7.2 percent in the final three months of 2023.

“We are confident that the country will post a full-year economic growth that is close to the low-end of the DBCC’s [Development Budget Coordination Committee] growth assumptions of 6.0 to 7.0 percent for 2023,” Diokno said in a statement.

Diokno stated that the growth will be bolstered by the declining inflation, favorable labor market conditions, and a rise in consumer spending, especially during the upcoming holiday season.

The Philippines’ GDP growth outturn in the third-quarter outpaced major economies in Asia that have released their data for the period such as Vietnam (5.3 percent), Indonesia and China (4.9 percent), Malaysia (3.3), and Singapore (0.7 percent).

“This strong performance is buoyed by robust domestic demand despite high inflation, improved government spending, and a better global growth outlook,” he said.

Domestic demand in the quarter ending September grew by 3.9 percent from 8.9 percent in the same period last year driven by the continuous increase of household consumption and the rebound in government spending at 5.0 percent and 6.7 percent, respectively.

All major production sectors posted positive year-on-year growths and the first three quarters of 2023, reflecting continued broad-based economic expansion.

The services and industry sectors expanded by 6.8 percent and 5.5 percent, respectively, although both are slower than respective growth rates of 9.3 percent and 5.8 percent a year ago.

Agriculture grew moderately by 0.9 percent, from 2.1 percent growth last year.

The major contributors to the third-quarter GDP growth were wholesale and retail trade, financial and insurance activities, and construction.

By major sectors, the services sector’s wholesale and retail trade contributed 1.1 percentage points (ppt) to real GDP growth, while financial and insurance activities contributed 1.0 ppt.

From the industry sector, construction contributed 0.9 ppt and manufacturing and utilities both contributed 0.3 ppt.

Under the agriculture sector, agricultural support activities and corn contributed 0.05 ppt and 0.03 ppt, respectively.

The rebound in government consumption contributed 1.0 ppt as it expanded by 6.7 percent, faster than 0.7 percent last year and an acceleration from the 7.1 percent contraction in the previous quarter.

Based on seasonally adjusted data, government consumption jumped by 8.1 percent from a 5.4 percent contraction in the previous quarter, reflecting the intensified implementation of the national government agencies’ catch-up plans.

However, total investments or gross capital formation had a slightly negative contribution (-0.4 ppt) as it declined by 1.6 percent, mainly due to drawdowns in inventories for the second consecutive quarter. Nevertheless, construction posted a double-digit growth of 12.4 percent driven by public and household construction.

The lower negative net exports, which is equivalent to a 12.9 percent YoY improvement, resulted in a positive 1.4 ppts contribution to GDP growth in Q3 2023. This was driven by the 11.7 percent growth in service exports largely from travel services, reflecting the improving tourism condition in the country.

However, imports of goods and services contracted by 1.3 percent mainly due to imports of semiconductors (-1.1 ppt) and electronic data processing (-0.4 ppt) that contributed negatively to growth.