Philippines trims 2023 GDP growth target due to global risks
Government uses 55-59 per dollar FX assumption for 2023 goals
Inflation seen to cool from 2023 after quickening to 2008 high
Philippine President Ferdinand Marcos Jr.’s economic team lowered its 2023 growth forecast as the global outlook worsens and domestic inflation hovers near a 14-year high.
Gross domestic product will probably expand 6%-7% next year from a previous projection of 6.5%-8%, the Development Budget Coordination Committee, which sets economic assumptions for fiscal purposes, said Monday. It left this year’s growth estimate of 6.5% to 7.5% unchanged.
“This momentum is expected to slightly decelerate in 2023,” DBCC said in a statement, “considering external headwinds such as the slowdown in major advanced economies.”
The latest projections come as Marcos nears completion of his first six months in office amid a slew of challenges including soaring prices and borrowing costs and tepid global demand. Despite the forecast reduction, the Philippines is still seen as among economic growth leaders in Asia.
Inflation is expected to peak this month after the central bank unleashed its most aggressive monetary tightening in two decades to quell the fastest price gains since 2008, as well as shore up the peso. The economic team expects inflation to average 5.8% this year before cooling to 2.5%-4.5% in 2023 and ease back to the 2%-4% target band through 2028.
GDP is expected to pick-up in 2024-2028 and expand by 6.5%-8%, supported by state intervention in agriculture and electronics industries.
The economic team used an exchange rate assumption of 55-59 per dollar for 2023 from a range of 54-55 this year on heightened global uncertainties and the Federal Reserve’s aggressive policy tightening.
While the peso remains Southeast Asia’s worst performer this year, it has gained about 5% this quarter, along with most peers in the region. The Philippine currency, which slumped to a record low 59 per dollar weeks ago, is little changed as of the noon break Monday at 55.80.
“As we move forward amid the sharp increase in inflation this year, the government commits to take actions that will mitigate the lingering effects of the Covid-19 pandemic and impact of geopolitical tensions,” DBCC said.
Here are the DBCC’s latest estimates: