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Philippine economy grows 7.6% in 2022, beating target and expectations

A man pushes a goods cart through a crowded market in Manila on September 21, 2022. The Asian Development Bank on September 21 cut its 2022 growth forecast for developing Asia, with crippling Covid-19 lockdowns in China, conflict in Ukraine and efforts to combat inflation dragging on the region. - AFP / Jam Sta. Rosa

Ramon Royandoyan –
January 26, 2023 | 10:19am

The Philippine economy ended 2022 on a high note despite roiling external headwinds that forced Filipinos to endure high inflation, although there are emerging signs that growth likely reached its peak and a slower trajectory is coming this year.

Gross domestic product, the sum of all goods and services produced in the country, expanded 7.6% year-on-year in 2022, better than the 5.7% growth recorded in the previous year, the Philippine Statistics Authority reported Thursday.

The latest figure crushed analysts’ expectations of a 7.5% growth last year. It also beat the Marcos administration’s target of 5.8% GDP expansion for 2022.

A wave of consumer spending during the holiday season, among others, anchored economic growth in the final quarter of 2022. In the last three months of last year, the economy expanded 7.2% on-year, albeit slower compared to 7.6% growth recorded in the preceding quarter.

This marked another year of growth, two years removed since the pandemic sent the domestic economy into lows unseen since World War II. Consumer spending proved to be a bright spot, as the Philippine economy managed to eke out modest growth in the third quarter.

As it is, the past year proved to be bittersweet for Filipinos. The national government loosened pandemic curbs early on in the second quarter, amid a polarizing election year that saw the late dictator’s son elected into the presidency.

President Ferdinand Marcos Jr.’s early months saw consumer spending return in droves. But supply chain disruptions, expensive fuel prices, and a weak peso spoiled the Philippines’ reopening story. Inflation is widely expected to have peaked in December 2022, as rising consumer prices weakened the public’s purchasing power.

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said that revenge spending kept the economy humming in the fourth quarter.

“Revenge spending helped lift overall economic activity last year but at the expense of a drawdown in savings and an increase in household debt,” he said in a Viber message ahead of the data release.

The ING economist projected GDP to shoot up 7.7% in 2022, expecting growth in the final quarter of 2022 to hit 7.5% year-on-year.

Separately, Domini Velasquez, chief economist at China Banking Corp., credited the upswing in 2022 to the third-quarter GDP figure, which posted a surprise growth as inflation failed to dampen consumer spending.

“Momentum from economic reopening, pent-up demand after two years of lockdowns, and election spending contributed to 2022’s growth,” she said in a Viber message.

Velasquez noted the agriculture was the sole laggard, considering production stayed in the red for most of 2022 amid a flurry of typhoons and expensive fertilizer prices.

That said, this year could prove to be another trying year for the Philippine economy. A projected global economic recession could slow down any gains from the country’s largest trading partners. Likewise, the gloomy outlook could prompt foreign investors to think twice about parking their money in the country.

ING’s Mapa agreed with this assessment.

“2023 will be more challenging given the triple threat and the potential global recession,” he said.

Velasquez characterized 2023 as a year that could see demand momentum slow down. As it is, the BSP’s interest rate hikes to tame inflation have begun to make their way around the economy already.

“High interest rates will also be a deterrence to business expansion. However, recent Chinese re-opening will be a tailwind for this year, providing much-needed boost against recessions in advanced economies,” she added.