AMRO: Headwinds easing ‘24 GDP growth

An economic think tank sees inflation and other economic headwinds affecting the 6.3-percent growth forecast for the Philippines in 2024.

In its 2023 Annual Consultation Report on the Philippines, the ASEAN+3 Macroeconomic Research Office, or AMRO, said growth is forecast to moderate to 5.6 percent in 2023 from a multi-decade high of 7.6 percent in 2022.

It said it will pick up to 6.3 percent in 2024 as external demand recovers. Meanwhile, headline inflation is expected to rise from 5.8 percent in 2022 to 6.0 percent in 2023 and then moderate to 3.6 percent in 2024, within the 2–4 percent inflation target.

"In the short term, the impact of high inflation on the economy remains the key concern. Economic slowdown in major trading partners, volatility in the global financial markets along tighter financial conditions could also weigh down on growth outlook," AMRO said in a statement on Monday.

Over the medium to long term, the country's growth potential faces several challenges, "including the scarring effects of the pandemic, a slower pace of infrastructure development, heightened geopolitical risks, and economic losses from extreme weather events," it said.

The report was based on AMRO's visit to the Philippines from 29 August to 8 September 2023, and data and information available up to 9 November 2023.

Economic outlook

The AMRO report stated that GDP growth was robust in the first three quarters of 2023. Despite weaker external demand, the growth momentum is expected to be sustained by resilient household consumption reflecting an improving labor market, lower inflation, robust overseas remittances, and higher government infrastructure spending.

"On the external front, a widening current account deficit was partly offset by net capital inflows and the international reserve buffer remains adequate. Inflation remained high in 2023, driven by buoyant demand and supply shocks. The high core inflation reflects elevated inflationary pressure due to a positive output gap and the second-round effects from increases in minimum wages and persistently high inflation expectations," it said.

For the banking sector, it sees improved profitability, ample liquidity, and a sufficient capital buffer. The fiscal position continued to improve in 2023 due to strong revenue collection and moderate spending.