Philippines Economic Outlook
In Q4 2022, the economy beat market expectations, bringing full-year growth to a 46-year high and the strongest rate in ASEAN. That said, annual GDP expanded at a slower pace compared to Q3 on softer increases in private spending and investment. Higher inflation eroded non-discretionary purchases, while weaker business confidence weighed on capital formation. More positively, public spending and exports growth both ticked up. In Q1 2023, GDP is likely expanding at a somewhat softer, but still robust, pace. In January, the manufacturing PMI rose to a seven-month high due to sharp increases in output and new orders. Less positively, inflation strengthened during the same month, prompting another interest rate hike in February. In other news, since the start of the year, the government raised USD 5.1 billion in a bond sale, which will finance public spending this year.
Inflation grew to 8.7% in January on stronger price pressures for food (December: 8.1%). One of the most aggressive monetary policy tightening cycles in ASEAN, lower global commodity prices and government subsidies should bring inflation back within the Central Bank’s 2.0–4.0% target range by Q4 2023. Potential currency weakness and global supply shocks pose upside risks.