Fitch Solutions sees 5.9% Phl GDP expansion in 2023

The strong headwinds form a quicker pace of monetary tightening and a slowing global growth environment, and the high base effect will pressure the Philippines' gross domestic product to temper in 2023, with Fitch Solutions forecasting the country to expand 5.9 percent next year. The figure is lower than its previous 6.2 percent growth.

The Fitch Solutions Country Risk and Industry Research was released a day after the Philippine Statistics Authority said the Philippines' gross domestic product expanded by 7.6 percent in the third quarter of this year. The latest gross domestic data showed that the Philippines' economy grew strongly by 2.9 percent quarter -on-quarter on a seasonally adjusted basis in the third quarter of 2022.

"The latest outturn exceeded our expectations and brought growth in the first three quarters of the year to 7.8 percent year-on-year," Fitch Solutions wrote in the report.

However, Fitch Solutions expect the pent-up demand to wane. It added that elevated inflation would continue to erode household purchasing power and weigh on private consumption.

"Already, we are seeing signs of inventory build-up in the Philippines, which contributed 2.3pp to headline growth in Q322," the report mentioned.

Fitch Solutions added that the above-target inflation and tightening external credit conditions would prompt the Bangko Sentral ng Pilipinas to continue its aggressive rate-hiking cycle, which would, in turn, weigh on investment prospects and, to an extent, household spending.

Industry analysts added that the outlook for the global economy had softened considerably, further dampening external demand for Philippine exports.

"Net exports continue to act as the biggest drag on headline growth, as import growth continues to outpace exports, coming in at 17.0 percent year-on-year and 13.1 percent year-on-year, respectively," Fitch Solutions said.