The country’s economic growth fell short of the government's target last year, largely due to higher consumer prices that discouraged spending, data from the Philippine Statistics Authority (PSA) showed.

The economy, as measured by the gross domestic product (GDP), expanded by 5.6 percent from January to December 2023, below the Marcos administration’s target of 6.0 percent to 7.0 percent. 

The figure also signified a notable slowdown compared to the 7.6 percent growth recorded in the previous year.

The subpar growth was a result of the economy only expanding by 5.6 percent in fourth quarter, falling significantly short of the minimum 7.2 percent expansion needed to meet the lower end of the government's target range.

The Philippines' fourth-quarter growth, however, exceeded that of China (5.2 percent) and Malaysia (3.4 percent), but lagged behind Vietnam (6.7 percent). It also slowed from 6.0 percent in the third quarter.

“While this growth is below our target of six to seven percent for this year, this keeps us in the position of being one of the best-performing economies in Asia,” National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said on Wednesday, Jan. 31.

“More importantly, our full-year GDP for 2023 is now 8.6% higher than pre-pandemic levels,” he added.

Balisacan said that last year's economic slowdown could have been affected by a series of interest rate hikes by the central bank.

The Bangko Sentral ng Pilipinas increased its benchmark interest rate by 450 basis points since May 2022 to counter inflation resulting from global supply disruptions and economic uncertainty following Russia's invasion of Ukraine.

In 2023, the headline inflation rate, which gauges the increase in prices of goods and services, climbed to six percent from 5.8 percent in 2022.

Per industry, agriculture grew 1.4 percent, while industry and services went up by 3.2 percent and 7.4 percent, respectively, in the fourth quarter.

Government spending, meanwhile, posted a disappointing 1.8 percent growth from the 6.7 percent improvement in the third quarter. This brings a full-year growth in public spending at 0.4 percent.

This is largely due to the fiscal consolidation program rooted in the vaccination program and the May elections in 2022, National Economic and Development Authority Secretary Arsenio Balisacan said.

"It was intentional that the growth of government spending for 2023 was not high. Because we want to achieve fiscal consolidation, which means reducing the fiscal deficit as well as the government debt,” Balisacan said.

The slower GDP growth in the fourth quarter was also due to net exports, declining by 2.6 percent as a result of the decline of goods exports at 11.6 percent. However, services exports increased by 12.3 percent.

Household consumption, on the other hand, posted a rebound of 5.3 percent after six quarters of decline, due to improvement in the labor market and growth in remittances.

Gross capital formation, or the net accumulation of capital goods like equipment, transportation assets, and electricity, also posted a positive growth at 11.2 percent from 1.4 percent in third quarter due to the expansion of durable equipment.