Philippine Economy Grew Faster-Than-Expected 5.6% Last Quarter
(Bloomberg) -- The Philippines overtook Vietnam and Malaysia to become Southeast Asia’s fastest-growing economy last year, with expansion driven by consumption, services and investment.
Gross domestic product expanded 5.6%, surpassing the median 5.5% growth seen in a Bloomberg survey of economists. The economy grew at a similar pace from a year ago in the final quarter of the year, while on a quarter-on-quarter basis, it clocked 2.1%.
Stocks extended their gains to more than 1% after the data. The peso held its loss, with the currency slipping 0.1% against the dollar.
While the annual pace of expansion is slower than the government’s 6%-7% target, it is the fastest pace in the region so far — overtaking Vietnam’s 5.05% performance. Malaysia’s economy, which posted Southeast Asia’s quickest growth in 2022 at 8.7%, likely slowed to 3.8% in 2023. Indonesia and Thailand are set to report economic data next month.
National Economic and Development Authority Secretary Arsenio Balisacan told reporters Wednesday that the government is confident that the economy will expand at a pace of 6.5%-7.5% in 2024 — which will help the Philippines retain the region’s top growth tag.
That echoes the optimism of President Ferdinand Marcos Jr. about the consumption-driven economy’s prospects, as inflation cools and the central bank halts one of the region’s most aggressive interest-rate tightening campaigns.
Still, sustaining the stellar performance requires heavylifting by the government, given monetary policymakers are unlikely to pivot to easing anytime soon amid lingering price risks.
The Southeast Asian nation, where consumption accounts for about 75% of GDP, also faces growing geopolitical risks amid tense relations with China over the South China sea. Domestic political noise has also risen as Marcos and his predecessor Rodrigo Duterte traded drug use accusations this week.
“Any country that has political instability will hurt the economy,” Balisacan said when asked to comment about the widening rift between Marcos and Duterte.
Details of the fourth-quarter GDP report:
- Agricultural sector output rose 1.4% from a year ago
- Industry sector output gained 3.2% year-on-year
- Service sector expanded 7.4% on-year
- Consumer spending grew 5.3% from prior year
- Investment jumped 11.2% year-on-year
While government spending declined 1.8% in line with fiscal consolidation efforts, Balisacan said he expected services expansion to continue pacing the economy’s growth trajectory.
Even as consumption has remained resilient, a sluggish global economy, elevated inflation and interest rates stand in the way of a significant improvement in growth prospects this year, said Robert Dan Roces, chief economist at Security Bank Corp. in Manila. “The growth momentum now falls on government spending,” he said.
What Bloomberg Economics Says...
All in all, GDP is holding up — and together with the retreat in the peso — that suggests Bangko Sentral ng Pilipinas will keep monetary policy settings tight at its next meeting on Feb. 15. Household spending remained firm and capital spending is recovering, altogether showing resilience to 450 bps of rate hikes this cycle. We expect the central bank to start cutting rates later this year — but only after the Federal Reserve starts easing first, which should take some pressure off the currency.
—Tamara Mast Henderson, Asean economist
For the full note, click here
Even as inflation in December slowed to within the central bank’s 2%-4% target band after 21 months, rate hikes aren’t fully off the table amid rising food prices. Any further tightening by the central bank could upend the consumption-led recovery in the economy.
Governor Eli Remolona earlier this month said that strong economic growth gives policymakers “a bit more room to hike.”
--With assistance from Tomoko Sato, Clarissa Batino, Claire Jiao, Cecilia Yap and Manolo Serapio Jr..
(Updates with details throughout.)
Source: https://www.bnnbloomberg.ca/philippine-economy-grew-faster-than-expected-5-6-last-quarter-1.2028663?fbclid=IwAR1ly4l-7TBSQeskc_cprif2KoZ6pZ2puUHk5PsnequfCoLPe8LcXANxfNw
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