The Asean+3 Macroeconomic Research Office (AMRO) has downgraded its growth forecast for the Philippines this year to 5.9 percent after the economy’s expansion slowed down in the second quarter.
“Philippines’ economic growth is projected to moderate to 5.9 percent in 2023 due to high base effects and weaker external demand, before edging up to 6.5 percent in 2024 as external demand recovers,” Runchana Pongsaparn, AMRO group head and principal economist, said.
“Meanwhile, domestic demand is expected to remain robust supported by continued improvement in labor market conditions, lower inflation, robust overseas remittances and higher government infrastructure spending,” she added.
In AMRO’s July quarterly update of the 2023 ASEAN+3 Regional Economic Outlook, the Philippines was projected to grow by 6.2 percent this year, while the forecast for 2024 was maintained.
The Philippine economy recorded its weakest performance in about two years as growth slowed down to 4.3 percent in the second quarter of 2023.
The weaker second quarter expansion brings the economy’s first semester average growth rate to 5.3 percent.
To achieve the government’s target growth rate of six to seven percent for the year, the country’s gross domestic product needs to grow by at least 6.6 percent in the second half of 2023.
Meanwhile, AMRO projects headline inflation to moderate to 5.5 percent in 2023 from 5.8 percent in 2022, and slow further to 3.8 percent in 2024.
“Despite some moderation, inflationary pressure will likely remain elevated as reflected in the high level of core inflation, due to a positive output gap and the second-round effects induced by increases in the minimum wages and expectations of persistently high inflation,” AMRO said.
According to the agency, the Philippine economic outlook is clouded by various risk factors and challenges.
“In the short term, the economy could be adversely affected by high inflation, especially due to local supply shocks in the food sector. An economic slowdown in major trading partners and volatility in the global financial market, along with tighter financial conditions, also pose risks,” AMRO said.
“The long-term growth potential is largely affected by the scarring effects of the pandemic, the pace of infrastructure development, geopolitical risks and the economic losses from natural disasters, which are being exacerbated by climate change,” it added.
