Philippines to stem ‘recessionary forces’
PRESIDENT Ferdinand R. Marcos, Jr. on Wednesday said the Philippines would resist global recessionary headwinds, but warned that increasing tensions in the South China Sea were harming trade.
In a speech at the World Economic Forum’s (WEF) annual meeting in Davos, Switzerland, the president said he was bullish about the country’s economic prospects.
“My belief is that as long as the unemployment rate stays low, we will be able to resist recessionary forces,” he said at the conference, which has been dominated by talk of an impending global recession brought on by rising food and energy prices.
Mr. Marcos said the upskilling of the country’s labor force was powering economic growth, including remittances from migrant Filipino workers.
But increasing tensions in the South China Sea were affecting trade on all of the exchanges in the region, he said. “The future of the region has to be decided by the region, not outside powers.”
Mr. Marcos earlier said he expects the domestic economy to grow by about 7% this year, citing strong fundamentals, prudent fiscal management and reforms in key sectors that would cushion against risks from a potential global recession.
The government, which will announce its 2022 economic performance on Jan. 26, expects economic growth last year to have topped its 6.5% to 7.5% goal.
“Our strong macroeconomic fundamentals, fiscal discipline, structural reforms and liberalization of key sectors instituted over the years have enabled us to withstand the negative shocks caused by the pandemic and succeeding economic downturns, and map a route toward a strong recovery,” Mr. Marcos said, based on a statement from the presidential palace.
Pent-up domestic demand after the removal of pandemic restrictions propped up economic growth last year and will continue supporting consumer spending this year, Bangko Sentral ng Pilipinas Governor Felipe M. Medalla said on Jan. 10.
“Our actual projection is 6.5% [for 2023] but there are signs that we might be able to surpass that,” Mr. Marcos said in Davos, where he also presented a still unapproved sovereign wealth fund bill to potential investors.
He said they were mainly introducing the idea. “We want people to be aware that this is in the pipeline. This is something that we can look forward to, and that we will be able to utilize for the continuing development in the Philippines.”
The Philippines is grappling with soaring prices of onions, widely used in many local dishes, and prompting the government to approve emergency imports.
Mr. Marcos said prices had started to come down thanks to the imports, but in the long term there was no getting around the need to increase production.
Asked about criticism that poor planning by the government, such as delayed decisions on imports, was to blame, he said the government had great difficulty in determining how much they had. He also blamed smuggling.
“We have a better handle on it now and I think we can see it in terms of our scheduling of our buying,” he said. “But the long-term solution is productivity.”
Mr. Marcos also said he was confident about economic growth given the country has a young and English-speaking workforce. “We have the youngest workforce in Asia,” he said, based on a transcript from the palace.
“You might be surprised to know that the average age of a Filipino worker is 23-and-a-half years old,” he said. “That is a huge demographic dividend.” He also said Filipino workers are well-trained and sophisticated.
“That is where my confidence comes from and that is the confidence that I hope to exude sufficiently, to bring that confidence also to all of you and all of our potential partners in the world,” he said.
WANING GROWTHMeanwhile, the Philippine economy is expected to grow by 5% this year as “favorable elements” that pushed expansion last year are expected to wane, ANZ Research said.
“We forecast growth of the Philippine economy to slow to 5% in 2023, as most of the favorable elements of 2022 falter,” it said. “The surge in export demand late last year will not be sustained amid a broadening of global growth risks.”
The firm kept its economic output growth forecast steady from its December estimate. This is also below the government’s 6% to 7% target this year.
But it raised its 2022 forecast to 7.5% from 7.2%, citing robust exports and demand during the holiday season. This matches the higher end of the government’s 6.5% to 7.5% target last year. ANZ Research said the Philippine economy likely expanded by 6.7% in the past quarter.
“The improvement in the labor market, strong remittance flows in real terms and solid demand for household credit lifted private consumption growth,” it said. “The drag from the net external demand side decreased as export growth offset import growth in late 2022.”
ANZ Research’s 2023 forecast for the Philippines is better than its outlook for Indonesia (4.7%), Malaysia (3.9%), Thailand (3.6%), Hong Kong (2.5%), Taiwan (2.5%) and Singapore (1.9%).
ANZ also sees Philippine inflation easing to 4.3% this year from 5.8% last year, still above the central bank’s 2-4% target.
The Philippine central bank raised key policy rates by 350 basis points in 2022, bringing the overnight reverse repurchase rate to a 14-year high of 5.5% from an all-time low of 2% to tame inflation.
Inflation averaged 5.8% last year. The central bank expects it to ease to an average of 4.5% this, year and to 2.8% in 2024.
ANZ Research expects the Philippine economy to expand by 5.3% in 2024. — Keisha B. Ta-asan and Kyle Aristophere T. Atienza with Reuters