Philippines Economic Forecast

The economy grew at a softer—albeit still upbeat—rate in Q1 2023. The moderation was driven by plunging exports amid the global economic downturn and the global tech sector’s slump, as well as softer private spending growth due to elevated inflation and interest rates. That said, stronger expansions in fixed investment and public spending prevented a larger deterioration in GDP growth. In Q2, economic activity is likely decelerating further. In April, the manufacturing sector PMI softened from the previous quarter’s average, coming in at an eight-month low due to ebbing production, weaker new business growth and falling employment figures. Meanwhile, official data released in May showed that foreign investment pledges made in Q1 surged by 1,823% year on year, boding well for growth prospects ahead.

In April, inflation subsided further to 6.6% (March: 7.6%) on cooling price pressures for food and housing and utilities. Our panel sees the headline rate easing from current levels by Q4 2023 but averaging marginally higher this year than in 2022. Lower commodity prices and government subsidies should keep a lid on inflationary pressures. Currency weakness is an upside risk.