Philippines: ‘Economy likely grew by a robust 6% in Q2’

MANILA, Philippines — The country’s economic growth remained robust in the second quarter, with gross domestic product (GDP) expanding by around six percent, the Bangko Sentral ng Pilipinas (BSP) said.

Outgoing BSP Governor Felipe Medalla said in an economic forum that the economy likely expanded by around six percent from April to June this year.

“But what we know, the numbers I have seen and the forecasts I have seen from the staff, (it) is going to be more than six percent. Whether it’s higher or lower than the first quarter, we don’t know.”

The Philippines booked a GDP growth of 6.4 percent in the first quarter, albeit slower than the 7.1 percent in the fourth quarter and eight percent in the first quarter last year, but faster than the market expectation of 6.1 percent.

Amid the external headwinds brought about by elevated inflation and the aggressive rate hikes delivered by global central banks led by the US Federal Reserve, the Cabinet-level Development Budget Coordination Committee (DBCC) decided to maintain this year’s GDP growth target at six to seven percent.

The country’s GDP expansion accelerated to 7.6 percent last year from 5.7 percent in 2021 with the full reopening of the economy as the strict COVID quarantine and lockdown protocols were lifted.

The country slipped into recession in 2020 with the GDP shrinking by 9.5 percent as the economy stalled due to strict mobility restrictions imposed by the government to slow the spread of COVID-19 infections.

“Our own forecast is the GDP growth will be above six percent this year. Of course, it’s hard to grow when your base is larger,” Medalla told participants of the economic forum.

For the first quarter, he said spending in hotels and restaurants jumped by 23.8 percent in the first quarter, while car sales zoomed by 44.8 percent from January to May this year.

Likewise, tourism-related revenues amounted to P214 billion in the first quarter as the number of international tourists reached 1.47 million from January to April this year.

He added that there is also revenge spending by Filipino consumers.

“Pent-up demand has been a key growth driver,” the BSP chief said.

Medalla pointed out that the current circumstance have allowed the BSP to prioritize its mandate of price stability by bringing back inflation back to within the two to four percent target range.

In the same forum, National Economic and Development Authority Undersecretary Rosemarie Edillon said the Philippines performed remarkably over the past decade, with GDP growth posting between six and seven percent.

Unfortunately, the streak was interrupted in 2020 by mobility restrictions and policy response challenges during the height of the pandemic, resulting in a sharp contraction of 9.5 percent.

“Nevertheless, the economy demonstrated remarkable resilience. In 2022, the full-year growth reached 7.6 percent, surpassing the government’s official target of 6.5 to 7.5 percent. The first quarter of 2023 also brought good news, as growth remained strong at 6.4 percent, indicating a continued recovery and a return to the high-

growth trend observed before the pandemic,” Edillon said.

Edillon added that two main factors have played a significant role: consumption on the demand side and services on the supply side.

“The reopening of our economy, largely facilitated by the relaxation of mobility restrictions, provided a boost to household spending, particularly as people eagerly resumed travel. The services sector, which includes retail, tourism, transportation, and education, benefited the most from the reopening, as it encompasses high-contact industries,” she said.