How 2022 GDP Growth Affects Philippine Economy 2023

Stronger-than-anticipated domestic demand brought on by increased employment and a revival in tourism after the nation repealed COVID-19 movement restrictions is likely to propel the Philippine economy to quicker growth in 2022 than had been projected, according to economic analysts and experts.

This is a piece of promising and confidence-boosting news for investors who participated in the World Economic Forum this year.

This projected economic forecast was made after the significant growth in the country's GDP in 2022.

The Gross Domestic Product (GDP) measures the overall economic health and activity of a country. The rate of increase in the real gross domestic product is often used as a measure of economic progress and prosperity. With this in mind, growth in the real gross domestic product is often seen as indicative of economic health.

A Recap of the PH Gross Domestic Product

As we can remember, it is worth noting that the Philippines' GDP grew by 5.7% in 2021 after contracting by 9.6% in 2020 when the economy froze on account of the COVID-19 lockdowns, marking the departure of the pandemic-induced recession.

Meanwhile, GDP rose 7.8 percent in 2022 as a whole, with an expansion of 8.0 percent in the last quarter alone. Economic managers working under the Cabinet's Development Budget Coordination Committee (DBCC) had set a growth goal of 6.5 to 7.5 percent for 2022, so this is a significant increase from that.

An Outlook for the 2023 Domestic Economy

The stability of the GDP base in the Philippines might bring the country's GDP growth projection back to a more typical range of 6% to 7% in 2023 and beyond, with no more lockdowns in 2022. There are many factors that affect these growth prospects.

Lower individual income tax rates

Increased consumer spending, quicker economic growth, and relief from the negative consequences of increasing prices and inflation would result from the reduction of individual income tax rates for most income groups which commences this January.

Getting the economy back on track

The hazards of increasing interest rates were overshadowed by the benefits of actions taken to move the economy towards more normality, which improved sales, profits, and employment despite aggressive rate rises given by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

Recent Chinese re-openings

The reopening of the Chinese economy will be a boon for this year and will help stave off a recession in developed countries.

BSP monetary board about to complete its rate cycle

Since inflation has been drifting down and is expected to be under goal by 2023, the BSP Monetary Board is considering concluding its rate cycle soon, which would give some stability to the market while it shifts its focus to economic support. Last year, the benchmark interest rate from its monetary policy reached a 14-year high of 5.50 percent after the central bank boosted key policy rates by 350 basis points, from a record low of two percent.

Potential Growth Risks in 2023

In 2022, the Philippine economy showed good underlying growth momentum and resilience, and this trend is anticipated to continue in 2023. However, the World Bank and analysts do predict negative threats to growth this year with the rising borrowing costs and inflation in the global economy.

Expected slow GDP growth in Southeast Asia

When compared to other Southeast Asian countries, the Philippines' rate of growth will be towards the top of the region's forecast. Despite a less optimistic projection for Asia and the Pacific as a whole, the research boosted its growth forecast for the area to 5.5% for 2022 from 5.1%. As of 2023, economists anticipate GDP growth in Southeast Asia to slow to 4.7%.

Oil price hike

It is anticipated that in 2023, uncertainties resulting from Russia's invasion of Ukraine would continue to weigh heavily on commodity prices, notably oil, which will harm the Philippines because of our heavy reliance on imported oil.

Inflation and high-interest rates

Consumption was expected to fall in 2022 as a result of persistently rising inflation. Previous projections indicated that inflation was possible to accelerate to 5.7% in 2022 from 5.3%, before moderating this year, with the prediction for 2023 remaining unchanged at 4.3%. Similarly, with the current high-interest rates, businesses are less likely to take on new projects.

All in all, the experts forecast an average GDP growth rate of 6% for the year 2023. Growth in the gross domestic product in 2022 was strong, and they expect that trend to continue into 2023; nevertheless, they are being particularly cautious this year due to event risks and other policy changes.

Infrastructure Developments for a Robust and Dynamic Economy

In order to stimulate employment and establish the groundwork for a stronger economy, the government has said that it plans to maintain its focus on its signature infrastructure projects.

The Malolos Clark Railway Project and the South Commuter Railway Project are two such high-priority projects; they are both components of the North-South Commuter Railway System, which aims to create a reliable, swift, and efficient transport connection between Metro Manila and the provinces of northern and southern Luzon.

Furthermore, the EDSA Greenways Project's goal is to enhance and modernize the pedestrian experience along the primary EDSA thoroughfare, and the Metro Manila Bridges Project aims to help solve traffic congestion in the metropolis, especially in Eastern Manila, both of which will contribute to the accessibility of the roads in the nation's capital, Metro Manila.

All these projects are just some of the infrastructure developments that the government lined up, which aid us in keeping up with developing countries.

Also, the Philippine Development Plan (PDP) was recently authorized by President Ferdinand Marcos Jr. It aims to improve the economic and social change of the nation from 2023 to 2028.

By getting the economy back on its high-growth track and pushing for efficient economic transformation, the plan hopes to create a successful, inclusive, and resilient society where people can find and keep good jobs.

The Philippines should anticipate neither stagflation nor a recession in 2023, as its economic foundations remain unharmed thanks to the ongoing reopening of the country's economy.

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