Philippines Economic Forecast

After slowing to an over two-year low in Q2, annual economic growth should have accelerated in Q3. Manufacturing output grew faster in July than in Q2, which likely partly supported the softer drop in merchandise exports compared to the previous quarter. That said, available data points to mounting downside risks to current growth projections. July’s higher unemployment rate and weaker retail sales growth suggest ailing private spending at the start of the period. In August, the manufacturing PMI swung into contractionary territory for the first time in two years amid signs of slowing demand. In the same month, price pressures intensified again after six months of disinflation due to recent typhoons disrupting food supply. Agricultural output is facing additional headwinds from the onset of the El Niño weather phenomenon, which has sparked dry spells in 11 provinces key to crop production.

Inflation picked up in August, rising to 5.3% (July: 4.7%) on intensifying price pressures for food. This year’s headline rate will average marginally below 2022’s level. However, forecasts are likely to be adjusted upwards in the coming months amid El Niño triggering drought and further food price spikes. A weaker peso poses another upside risk to prices.