Julia Goh, Chief Economist at UOB Group, and Loke Siew Ting, Economist, comment on the latest GDP results for the Philippines.

Main conclusions

“The Philippine economy grew at a higher-than-expected pace of 7.2% YoY in Q4 2022 (vs UOB estimate: +6.5%, Bloomberg: +6.6%), but in trend terms, the growth rate it slowed from 7.6% in the prior quarter and a previous high of 8.2% in the first quarter of 2022. Real GDP growth for the full year was also higher than expected, at 7.6% in 2022 (UOB est: 7.4% , Bloomberg est: 7.4%, 2021: +5.7%), which represents the highest annual growth since 1976.”

“Almost all economic sectors registered positive growth in the fourth quarter of 2022, except agriculture, hunting, fishing and forestry. The resilience of household consumption, the increase in public spending, the maintenance of investments and Strengthening exports against a backdrop of slowing imports also helped support growth momentum last quarter and fully cushioned the drag on stock recall activities.”

“We expect real GDP to moderate further throughout 2023, taking the full-year economic growth rate to 5.0% (official est: 6.0%-7.0%) from a 46-year high of 7.6% in 2022. Our view primarily takes into account statistical base effects and downside risks to growth prospects Although the country’s economic growth is expected to continue its downward trend, inflation risks remain on the upside, which suggests the interest rate will need to rise further to reach sufficiently restrictive levels for some time, so we stand by our BSP forecast of two more 25bp hikes in Q1 2023 before pausing at 6.00 % since then.”