MANILA, PHILIPPINES (20 September 2023) — Philippine economic growth is expected to moderate this year due to inflation and global headwinds before picking up in 2024 as price pressures ease, according to a report released by the Asian Development Bank (ADB) today.
ADB’s Asian Development Outlook (ADO) September 2023 forecasts the Philippine economy to grow by 5.7% this year compared to the 6.0% projection in the April report. The 2024 gross domestic product (GDP) forecast is maintained at 6.2%, with household consumption and public spending on infrastructure and social services seen contributing to the economy’s expansion.
“The Philippines’ growth story remains strong despite an expected moderation in 2023. Public investment and private spending fueled by low unemployment rate, sustained increase in remittances from Filipinos overseas, and buoyant services including tourism will support growth,” said ADB Philippines Country Director Pavit Ramachandran. “The government’s large infrastructure projects should further stimulate consumption, boost jobs, and spur more investment.”
Downside risks to the outlook are likely to come from global headwinds such as geopolitical tensions and a sharper-than-expected slowdown in major advanced economies.
The government met its target spending on infrastructure of 5.3% of GDP in the first half of the year and is expected to maintain this level of investment with several big-ticket projects underway. ADB is helping finance some of these major, transformative projects such as the Malolos-Clark Railway Project, South Commuter Railway Project, Improving Growth Corridors in Mindanao Road Sector Project, and Integrated Flood Resilience and Adaptation Project – Phase 1 approved last week.
Strong growth in services output of 7.2% in the first half of 2023 was on top of an 8.8% expansion a year earlier, with the sector contributing 80% of GDP growth in the period. The country recorded 3.6 million foreign visitor arrivals from January to August, surpassing 2.7 million visitors in all of 2022, government data show.
Higher tourism-related receipts, sustained remittances, and strong service exports, particularly from business process outsourcing, will help lift the current account and offset weak merchandise exports, the report said.
Forecasts for inflation are maintained at an average of 6.2% in 2023 and 4.0% in 2024, the report said. However, possible severe weather disturbances including the El Niño dry weather phenomenon, pressures from elevated global commodity prices, and second round effects from higher transport fares and minimum wage hikes could slow the pace of inflation easing.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.