Philippines’ 2023 GDP Growth at 5.6% Misses Official Target

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In 2023, the Philippine economy faced challenges that led to a GDP growth rate of 5.6%, falling short of the government’s target range of 6% to 7%. Rising inflation and increased interest rates constrained household spending power, impacting overall economic performance.

The slowdown was evident in the final quarter of 2023, with GDP growth at 5.6%, a decline from the 7.1% recorded in the same period in 2022. The aggressive rate hikes by the Bangko Sentral ng Pilipinas (BSP), including an emergency increase of 25 basis points in October, were cited as factors that could have tempered growth.

Nicholas Antonio Mapa, a senior economist at ING Bank in Manila, suggested that growth could have been faster without the aggressive rate hikes. However, the BSP maintained its benchmark lending rate at 6.5%, aiming to manage inflation.

Efforts to address inflation include price caps on essential commodities, reflecting the government’s commitment to stabilize prices. Despite a contraction in public spending in the last quarter, the government remains focused on managing inflation and fostering economic growth.

Arsenio Balisacan, the National Economic and Development Secretary, emphasized the need for investment in sectors like agriculture to boost productivity. While the agricultural sector expanded by 1.2% in 2023, there is a call for increased investment to drive sustainable growth.

Miguel Chanco, chief economist for Pantheon Macroeconomics, attributed the slowdown to fading benefits from reopening the economy post-pandemic, exacerbated by the BSP’s rate hikes. Consumers, facing inflationary pressures, tapped into savings, impacting household consumption.

Looking ahead, economists anticipate faster growth in 2024, driven by easing inflation and potential interest rate cuts in the latter part of the year. However, uncertainties persist, including global economic trends and geopolitical tensions, which could influence the Philippines’ economic trajectory.