The ocean and the beach in the Philippines

Philippines GDP Q4 2023

Philippines: GDP loses momentum in the fourth quarter

According to a preliminary estimate, GDP growth moderated to 5.6% year on year in the fourth quarter, from 6.0% in the third quarter. The moderation stemmed from a contraction in both exports and public spending. Meanwhile, on a seasonally adjusted quarter-on-quarter basis, economic growth moderated to 2.1% in Q4, following the previous period’s 3.8% growth. Lastly, Q4’s moderation brought full-year growth to 5.6% (2022: +7.6%), largely in line with market expectations but below the government’s target of 6.0–7.0%.

Government consumption deteriorated, contracting 1.8% in Q4 (Q3: +6.7% yoy). This dampened the positive contribution of private spending and investment on overall economic performance; private consumption growth rose to 5.3% year on year in Q4 from a 5.1% expansion in Q3, and fixed investment growth accelerated to 10.2% in Q4 (Q3: +8.1% yoy).

On the external front, exports of goods and services plunged at the steepest rate in over two years, contracting 2.6% in the final quarter (Q3: +2.6% yoy). Conversely, imports of goods and services bounced back, growing 2.9% in Q4 (Q3: -1.1% yoy), marking the best reading since Q1 2023. Taken together, these developments weighed on Q4’s result, as net exports detracted 1.7 percentage points from GDP growth, after Q3 saw a 1.3 percentage point contribution.

Our panelists expect the Philippines to be among ASEAN’s fastest-growing economies in 2024, supported by stronger expansions in public spending and exports. Resilient private spending and fixed investment will also drive momentum. A hard landing of the global economy, a longer-than-anticipated tech-sector downturn and mounting tensions with China pose downside risks.

UOB analysts Julia Goh and Loke Siew Ting commented on the outlook:

“We have projected the nation’s real GDP growth to improve further to 6.5% this year on the back of a larger budget expenditure, easing inflationary pressures leading to a less restrictive monetary policy stance amid continuation of the government’s non-monetary intervention measures, as well as export recovery following an expected upturn in the global tech cycle.”

ING analyst Nicholas Mapa said:

“Given our expectation that revenge spending is indeed winding down, we could see household spending capped as consumers work to pay off debt built up over the past two years. Capital formation, which posted a surprise jump in the fourth quarter of 2023, could be muted this year once aircraft re-fleeting operations of local airlines come to an end by the first quarter. The wild card remains government spending with fiscal authorities receiving a decent 11% increase in this year’s budget. Unless we see a sustained push from both government expenditures and public construction, however, we could see growth slipping below the upsized 6.5-7.5% target in 2024.”

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