The Marcos, Jr.
administration has led the
Philippines to become the
fastest-growing economy
among major Asian countries in 2023, defying global challenges such as elevated inflation and slower
growth.
The Philippine
economy grew by 5.5
percent for the first three
quarters of the year––the
fastest among the major
economies of China (5.2
percent), Indonesia (5.1
percent), Vietnam (4.2
percent), Malaysia (3.9
percent), Thailand (2.0
percent), and Singapore
(0.5 percent).
“Despite elevated domestic and world
inflation, slow global economic growth, trade restrictions, and geopolitical
tensions, the Philippines
remains to be among the
brightest spots in the region,” Finance Secretary
Benjamin E. Diokno said.
Economic expansion remained broadbased as all major production sectors posted
positive year-on-year
(YoY) growths in the first
three quarters of the year,
led by services (7.0 percent), industry (3.7 percent), and agriculture (1.1
percent).
Multilateral organizations recognize the
strong economic performance of the Philippines
and expect the country’s
expansion to be one of
the fastest among its regional peers in 2023 with
the Asian Development
Bank (ADB) forecasting
a growth of 5.7 percent,
the ASEAN+3 Macroeconomic Research Office
(AMRO) and World Bank
(WB) at 5.6 percent, and
the International Monetary
Fund (IMF) at 5.3 percent.
Meanwhile, the
Philippines’ external performance remains strong
with gross international
reserves (GIR) increasing
to USD 102.7 billion as
of end-November 2023,
from USD 101.0 billion in
end-October.
The current GIR
level represents a more
than adequate external
liquidity buffer equivalent
to 7.6 months’ worth of
imports of goods and payments of services and primary income.
This level also
remains well above the
IMF’s Assessing Reserve
Adequacy (ARA) metric
at 1.9 in 2023, remarkably
higher than China’s 0.7, as
well as Malaysia and Indonesia’s 1.1.
The Philippine
peso likewise continues to
be supported by structural
foreign exchange inflows
and ample international
reserves.
The peso-dollar exchange rate settled
at 55.38 pesos per US
dollar on December 27,
2023, averaging PHP
55.63 year-to-date (YTD).
This remains within the
peso-dollar exchange
rate assumption for 2023,
which is PHP 55.50 to
56.00 per US dollar.
In addition, total cash remittances from
Overseas Filipinos (OFs)
also continue to increase.
On a YTD basis, cash remittances coursed through
banks in the first 10
months of 2023 amounted to USD 27.5 billion, up
by 2.8 percent from USD
26.7 billion recorded in the
same period a year ago.
Based on available data, the Philippines
also has the lowest external debt-to-GDP ratio among the ASEAN-5
countries, making it less
vulnerable to adverse external shocks.
As of end-Q3 2023, the
country’s external debt-toGDP was recorded at 28.1
percent, lower than Indonesia’s 28.9 percent and
Malaysia’s 69 percent for
the same period, as well
as Thailand’s almost 40.0
percent as of Q2 2023.
Business process outsourcing (BPO),
which is one of the most
dynamic and fastest-growing sectors in the Philippines, continues to post
higher earnings.
Total estimated
BPO export revenues,
consisting of computer
and other business services, amounted to USD
21.3 billion for the first
three quarters of 2023,
7.6 percent higher than
the USD 19.8 billion total
revenues registered in the
same period in 2022.
The country’s inflation rate has also continued to decelerate to
4.1 percent in November
2023 from 8.7 percent in
January. This is well within
the Bangko Sentral ng Pilipinas (BSP)’s forecast of
4.0 to 4.8 percent for the
previous month.
“We remain on
track to achieve our medium-term fiscal targets
based on the latest revenue, deficit, and debt-toGDP ratios,” Secretary
Diokno said.
As of October
2023, the country’s fiscal
deficit stood at PHP 1.02
trillion, an 8.5 percent
decline compared to the
same period in 2022.
For the first three
quarters of the year, the
National Government
(NG) deficit-to-GDP ratio
reached 5.7 percent, still
below the full-year target
of 6.1 percent.
For the first 10
months of 2023, the NG
actual revenue collection
increased to PHP 3.22
trillion, exceeding the revenue target for the period
by 5.2 percent.
Given the robust
revenue performance, the
DBCC expects revenues
to reach PHP 3.85 trillion,
equivalent to 15.7 percent
of GDP in 2023. This surpasses the Medium-Term
Fiscal Framework
(MTFF)’s full-year revenue
collection target of PHP
3.63 trillion, equivalent to
15.3 percent of GDP.
C o n c u r r e n t l y,
the NG debt-to-GDP ratio
stood at 60.2 percent as of
end-September 2023, remaining below the MTFF
full-year target of 61.2 percent.
With fiscal prudence, the Philippines
managed to maintain its
investor-grade credit ratings amid a sea of downgrades in other economies, including the US.
In August 2023,
R&l affirmed the country’s
BBB+ rating and revised
its outlook from stable to
positive.
Meanwhile, in
November 2023, both
S&P Global and Fitch Ratings affirmed the Philippines’ BBB+ and BBB ratings with Stable outlook,
respectively.
“Credit rating agencies
and market analysts remain confident in the
country’s macroeconomic fundamentals due to
the sustained economic
recovery, strong external
position, improving fiscal
position with declining
debt, sound banking system, and stable political
environment,” the Finance
Secretary said.
Labor market
conditions have also remained favorable with
unemployment numbers
returning to pre-pandemic
levels.
The unemployment rate for the first 10
months of the year averaged 4.6 percent, better
than the 5.6 percent recorded in the same period
last year and the 5.3 to 6.4
percent target under the
Philippine Development
Plan (PDP) 2023-2028.
The employment
rate averaged 95.4 percent, while the labor force
participation rate (LFPR)
increased to 64.6, reflecting the country’s sustained
economic momentum and
government initiatives to
improve employment opportunities and labor conditions in the country.
Outlook for 2024
The Development Budget Coordination Committee (DBCC)
narrowed the Philippines’
growth target to 6.5 to
7.5 percent for 2024, taking into account the risks
posed by the possible
global economic slowdown, El Niño and other
natural disasters, as well
as geopolitical and trade
tensions.
Growth in 2024
will be driven by private
consumption as inflation is expected to return
within the target range;
falling oil prices; robust
public spending; greater
investments lured by the
country’s sound macroeconomic fundamentals,
investment-grade credit
ratings, and the implementation of structural reforms;
and increased demand
for Philippine exports as
supply chain bottlenecks
ease.
Meanwhile, a
broad-based expansion
in all major sectors of the
economy led by services,
and industry is expected to
drive growth on the supply
side.
The passage of
proposed legislative reforms will also help ensure
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the funding for the PHP
5.77 trillion national government budget for 2024
and will allow the attainment of the deficit target
of 5.1 percent of GDP in
2024 as specified in the
MTFF.
“The economic
team will continue to work
with Congress in pushing
for key reforms crucial to
accelerating economic
development,” Secretary
Diokno said. DOF.GOV
