1-2-2024 (MANILA) The Philippines has outpaced Vietnam and Malaysia to claim the title of Southeast Asia’s fastest-growing economy in the previous year, buoyed by robust consumption, services, and investment.
Recording a GDP expansion of 5.6 per cent, the Philippines exceeded the median growth projection of 5.5 per cent forecasted by economists. The economy maintained a similar growth trajectory from the previous year in the final quarter, registering a 2.1 per cent quarter-on-quarter increase.
Following the release of the data, stocks surged by over 1 per cent, while the peso experienced a slight dip of 0.1 per cent against the US dollar. Despite falling short of the government’s target range of 6 to 7 per cent, the annual growth rate marks the swiftest in the region, surpassing Vietnam’s 5.05 per cent performance. Malaysia, which boasted the region’s highest growth in 2022 at 8.7 per cent, is anticipated to have slowed to 3.8 per cent in 2023. Indonesia and Thailand are slated to disclose their economic figures next month.
Arsenio Balisacan, Secretary of the National Economic and Development Authority, expressed confidence on Wednesday that the economy would maintain a growth rate of 6.5 to 7.5 per cent in 2024, thereby securing the Philippines’ position as the region’s growth leader.
President Ferdinand Marcos Jnr shares this optimism regarding the consumption-driven economy, especially as inflation subsides and the central bank curtails its aggressive interest rate hikes. However, sustaining this commendable performance necessitates substantial efforts from the government, particularly as monetary policymakers are unlikely to shift towards easing measures amidst persistent inflation risks.
Moreover, the Philippines faces escalating geopolitical tensions, particularly concerning its relations with China over the South China Sea. Internal political discord has also intensified, with Marcos and his predecessor Rodrigo Duterte engaging in public accusations regarding drug use.
Arsenio Balisacan highlighted the adverse impact of political instability on the economy, emphasizing the need for cohesive governance.
Although government spending saw a slight decline of 1.8 per cent due to fiscal consolidation initiatives, Balisacan anticipates that the expansion of services will continue to drive the country’s growth trajectory.
Robert Dan Roces, chief economist at Security Bank Corp. in Manila, cautioned that despite resilient consumption, global economic sluggishness, high inflation, and interest rates pose challenges to significant growth improvements this year. He stressed the pivotal role of government spending in sustaining growth momentum.
While inflation has moderated within the central bank’s target band of 2 to 4 per cent in December after 21 months, the possibility of further rate hikes remains amid escalating food prices. Governor Eli Remolona acknowledged that robust economic growth affords policymakers some leeway for rate adjustments. However, any additional tightening measures could potentially disrupt the consumption-led recovery in the economy.
