Philippines Records 6.4% GDP Growth In Q1; Slower, But Better Than Expected

The first quarter of the Philippine economy is doing better than expected. However, the reports suggest that the growth is slower compared to the previous year.

In the first three months of 2023, the gross domestic product grew 6.4%, as per Philippine Statistics Authority (PSA) report published on Thursday. This growth was slower compared to the 7.1% annual growth recorded in the fourth quarter of 2022.

"This was the lowest growth registered after seven quarters when the country started to recover from the pandemic in the second quarter of 2021," PSA reported.

The major contributors to first-quarter growth are wholesale and retail trade; repair of motor vehicles and motorcycles, financial and insurance activities, and other services. Whereas, the major economic sectors include agriculture, forestry, fishing, industry, and services that helped the growth of GDP.

"On the demand side, Household Final Consumption Expenditure (HFCE) grew by 6.3 percent in the first quarter of 2023," it stated. "The following items also recorded growths: Government Final Consumption Expenditure (GFCE), 6.2 percent; Gross capital formation, 12.2 percent; Exports of goods and services, 0.4 percent; and Imports of goods and services, 4.2 percent."

The report further shared that the Gross National Income (GNI) grew by 9.9 percent in the first quarter and the Net Primary Income (NPl) from the Rest of the World increased by 81.2 percent during the period.

A senior economist at ING Bank in the Philippines' capital Manila, Nicholas Antonio Mapa said that the "Growth will likely moderate... supported by still robust consumption with the YoY reading benefiting from a favorable base," as per PhilStar.

"Rate hikes may cap bank lending and investment outlays as a whole while government spending should be slowed by concerns about the debt levels," Mapa explained.

Chief economist at China Banking Corp, Domini Velasquez, also pointed out that the GDP growth has slowed down and it will continue to lower in the upcoming quarters.

"Moving forward, we expect GDP in the coming quarters to print lower without the momentum from the pandemic reopening," she told the outlet. "For full-year 2023, we maintain our view that GDP growth will likely fall below or nearer the lower end of the government's 6.0-7.0% target."

National Economic and Development Authority chief, Arsenio Balisacan hinted that the reason behind slow growth is "higher interest rates last year," which could have "impacted consumption."

"There are estimates saying that effects could be felt within six months to a year, those effects tend to taper," Balisacan told the outlet.

Senior Asia economist at Capital Economics, Gareth Leather predicted that there will be an economic struggle in the upcoming months.

"We think the economy is unlikely to get much help from the public sector over the coming quarters," he said. "The country's debt-to-GDP ratio increased from 40% of GDP in 2019 to 61% in 2022 because of the pandemic, and a period of fiscal consolidation will be required to stop debt from rising further."