Philippines cuts economic growth outlook as inflation bites

MANILA: Philippine President Ferdinand Marcos Jr’s economic team is lowering its 2023 growth forecast as inflation nears a 14-year high and is seen crimping consumer demand.

Gross domestic product (GDP) will probably expand 6% to 7% next year from a previous projection of 6.5% to 8%, the Development Budget Coordination Committee, which sets economic assumptions for fiscal purposes, said yesterday. It left this year’s growth estimate of 6.5% to 7.5% unchanged.

The latest projections come as Marcos nears completion of his first six months in office amid a slew of challenges, including soaring prices and borrowing costs, increasing public debt and tepid global demand.

Inflation is expected to peak this month after the central bank unleashed its most aggressive monetary tightening in two decades to quell the fastest price gains since 2008, as well as shore up the peso.

The economic team expects inflation to average 5.8% this year before cooling to 2.5% to 4.5% in 2023 and ease back to the 2% to4% target band through 2028.

GDP is expected to pick up from 2024 to 2028 and expand by 6.5% to 8%, supported by state intervention in agriculture and electronics industries.

The economic team used an exchange rate assumption of 55 to 59 peso per US dollar (RM4.326 to RM4.64) for 2023 from a range of 54 to 55 peso (RM4.247 to RM4.326) this year on heightened global uncertainties and the US Federal Reserve’s aggressive policy tightening.

While the peso remains South-East Asia’s worst performer this year, it has gained about 5% this quarter. — Bloomberg

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