While there are lines the domestic economic growth is calculated to weaken this year following the deterioration of the global economic environment, some remain optimistic while others think full growth will hit the upper end of the government’s target.
Former Finance secretary Roberto de Ocampo himself has voiced out cautious optimism—his term “guarded optimism” – as regards the country’s economic prospects for 2023.
“Partly because I’m hardly a pessimistic, since a lot of things can be taken calmly,” de Ocampo, now chairman of the Veterans Bank, said in a television interview.
This is a rebound, in his view, from minus 11 to plus seven.
His thesis: “One of the biggest challenges we will have to face in 2023 is how to keep inflation within bounds while the challenges that are coming externally continue to be there.
Some have suggested the domestic economy has likely reduced speed in the last quarter of 2022 but expected full-year growth would help hit the upper rung of the government’s target.
A recent study published by the state think tank Philippine Institute for Development Studies or PIDS has suggested the country’s economic growth is projected to weaken.
In last year’s issue of the PIDS Economic Policy Monitor, the authors projected a “rough recovery” from the COVID-19 pandemic considering factors like intermittent quarantines and weak business and consumer confidence.
In their recent paper, the authors—Senior Research Fellow Margarita Debuque-Gonzales, Supervising Research Specialist John Paul Corpus, and Research Analyst Ramona Maria Miral—“anticipate further rough sailing this year and the next, as the country faces a new set of headwinds, with inflation becoming a global issue and leading to widespread monetary tightening, which presages a broad slowdown.”
With the country’s sustained economic reopening, the gross domestic product may grow by about 7.1 percent in 2022, which is within the government’s target of 6.5 to 7.5 percent.
But the GDP is projected to decelerate to 4.5 to 5.5 percent in 2023 due to the “gloomy and uncertain” outlook for the world economy —below the 6.5 percent target the current administration set for 2023.
The authors outlined key priorities that policymakers should consider to steer the economy through global headwinds.
One is to control inflation without harming growth. The authors noted that taming rapid inflation can be “difficult and extremely costly;” thus, careful calibration is crucial to prevent stifling economic recovery.
Another is smoothening exchange rate volatility while maintaining flexibility. “Avoiding severe exchange rate fluctuations should be a priority.
They also urged the government to pursue fiscal sustainability but emphasized the need to protect those at risk from the lingering effects of the pandemic and rising inflation.
It is also critical to prepare for financial tightening and uncertainty. “In an uncertain environment, financial regulators will need to stay vigilant and guard against possible threats to financial stability that could set off an adverse macro-financial feedback loop,” they noted.
The authors urged the current administration to address pandemic scars and continue the policy momentum on investments.