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Rising from the Downtrend: The Philippine Economy in 2023
Rising from the Downtrend: The Philippine Economy in 2023
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Rising from the Downtrend: The Philippine Economy in 2023
by Mary Antalan28 December 2023
Photo Courtesy: World Bank

Despite the economic challenges in the past few years caused by the COVID-19 pandemic, the Philippine economy still proved its capability to rise as it looked forward to the betterment of the lives of Filipinos.

With a 5.9 percent gross domestic product (GDP) in the third quarter of 2023, National Economic Development Authority (NEDA) Secretary Arsenio M. Balisacan said that this performance makes our economy the fastest among the major emerging economies in Asia that have released their 2023 GDP, with the Philippines leading, followed by Vietnam with 5.3 percent, Indonesia and China with 4.9 percent, and Malaysia with 3.3 percent.

According to the Philippine Statistics Authority (PSA), the country’s economy in the first third quarter had 5.5% GDP, which, according to the Bangko Sentral ng Pilipinas (BSP), will help the national and local governments' catch-up spending plans for the rest of the year, targeting 6.0%–7.0% GDP.

1st Quarter (January–March)

The first quarter of the country’s GDP in 2023 was not good as it expanded at a slower pace, marking its slowest growth since the country emerged from the pandemic-triggered recession in mid-2021.

According to the PSA, the country’s GDP increased by 6.4% from the first quarter of 2023, way lower than the 8% growth recorded in the first quarter of 2022 and the revised 7.1% growth in the fourth quarter of 2022.

National statistician Dennis Mapa said that the first quarter result marks the lowest growth after seven quarters of the country's recovery from the pandemic that started in the second quarter of 2021.

The slower growth in the economy can be attributed to the ongoing impact of the pandemic, including intermittent lockdowns and restrictions, supply chain disruptions, and labor market challenges.

2nd Quarter (April–June)

For the second quarter of 2023, the economy has seen a downtrend in GDP, marking a 4.3% drop from the 6.4% GDP in the first quarter. According to PSA, the main contributors to the second quarter GDP were wholesale and retail trade (5.3%); repair of motor vehicles and motorcycles (5.3%; financial and insurance activities (5.0 %; and transportation and storage (17.3 %.

Meanwhile, the gross national income (GNI) grew by 8.6 percent in the second quarter of 2023. Likewise, net primary income (NPl) from the rest of the world grew by 90.6 percent during the period.

3rd Quarter (July–September)

Compared to the 4.3% GDP from the second quarter, PSA’s data showed that the Philippine economy grew by 5.9% in the third quarter of the year. The main contributors were wholesale and retail trade, repair of motor vehicles and motorcycles with 5.0 percent, financial and insurance activities, and construction with 14.0 percent.

According to Mapa, the services sector has a large contribution to economic growth of 4.4%, followed by agriculture, forestry, and fishing.

NEDA Sec. Balisacan said that they enjoyed the growth of the country's GDP despite the economic challenges. Balisacan, however, said that the economy still needs to grow at 7.2% in the fourth quarter of the year to reach the government's growth target for 2023.

INFLATION

President Ferdinand “Bongbong” Marcos Jr., who also served as agriculture secretary from January to November, previously said that one of the problems that "makes him lose sleep" is the high inflation in the country.

"Iyan ang problema na 'di nagpapatulog sa akin, 'yung inflation. That's what I lose sleep every night over—is to how to bring down inflation," Marcos said during a panel interview with the media at Malacañang.

Prices of goods and services in the country remained high in 2023 as inflation hit a new record high of 8.7 percent in January from the 8.1 percent recorded in December 2022, driven by an 11.2% jump in food prices, the biggest since 2009. However, the following month showed a decline in inflation, from 8.6 percent in February to 4.1 percent in November.

The high prices of some agricultural products also made headlines this year. The 20 pesos per kilo rice pledge of President Marcos has unfortunately not been achieved so far. Prices of rice have reached up to 60 pesos per kilo, which has become hard for Filipinos to afford.

Due to this, the state’s Executive Chief has approved the recommendation of the Department of Agriculture (DA) and the Department of Trade and Industry (DTI) for the mandated price ceilings on regular and well-milled rice.

Under Executive Order No. 39, the mandated price for regular milled rice is PhP41.00 per kilogram, while the price cap for well-milled rice is PhP45.00 per kilogram.

As a response to the complaints of rice retailers due to the lesser revenue brought by the price cap, President Marcos Jr. has directed the concerned agencies to grant cash aids to ease the impact of the temporary price cap, helping rice vendors avoid expected losses.

A few weeks later, after the price ceiling was implemented, several warehouses were raided by the Bureau of Customs (BOC) and plenty of sacks of rice were discovered.

According to former Agriculture Secretary Manny Piñol, economic managers of the previous administration under former President Rodrigo Duterte's leadership should be the ones to blame for the rocketing price of rice.

"Ang ating dependence ngayon sa imported rice 30 percent. Ibig sabihin, 30 percent ng total ng supply ng bigas sa Pilipinas galing sa imported na bigas, Vietnaman at Thailand. Noong ako ang DA, less than 10% ang ating dependence on importation," Piñol said.

"Ang talagang dapat sisihin dito ang mga author ng Rice Tarrification Law na hindi nakinig sa payo ng eksperto: na wag tambakan ng imported na bigas ang palengke ng Pilipinas sapagkat mawawalan ng gana ang ating mga magsasaka na magtanim," he added.

Meanwhile, the cost of onions, a mainstay in almost all Philippine dishes, shot up from around 70 pesos ($1.28) a kilo in April to as much as 700 pesos in December, making them more expensive than meat.

The Philippines, however, remained in search of solutions; the Philippine Central Bank opted to deliver big 50-basis point rate hikes every month to cool the red-hot inflation. The government also distributed P1,000 in cash aid to help consumers amid the inflation crisis.

Oil Prices

One contributing factor to the easing of inflation, according to Diokno, is the downward trend in oil prices.

After experiencing significant surges due to the Ukraine-Russia conflict, fuel prices are now stabilizing.

This decrease in oil prices has a cascading effect on the costs of other commodities.

A perspective in 2024

Looking forward to the year 2024, the World Bank perceives that the country’s economy will grow by 5.8%.

The statement was made following the November data, which showed that the inflation rate was further increasing to 4.1 percent.

Expressing his optimism for 2024, Finance Secretary Benjamin Diokno said that the rate of inflation in the country will continue to slow down in the first quarter of next year.

However, he clarified that a lower inflation rate does not imply that prices will no longer rise.

“Ang ibig sabihin lang ay ‘yung pagtaas ng presyo ay hindi kasing taas nung before,” Diokno added.

Meanwhile, President Marcos vowed that the government is committed to bringing down inflation and maintaining overall price stability.

On December 21, the BSP said it had decided to retain its inflation target range of 2% to 4% through 2026, reiterating its readiness to tweak monetary policy to achieve targets.

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