Philippines Urged to Implement Tightened Macro Policies and Ramp Up Infrastructure Investment to Tackle High Inflation and Structural Challenges
Despite facing challenges such as high inflation and weakened external demand, the Philippines is poised to sustain a robust economic recovery.
The growth rate is anticipated to shift from 7.6 percent in 2022 to 5.6 percent in 2023, followed by a rebound to 6.3 percent in 2024 as external demand strengthens.
Headline inflation is expected to increase from 5.8 percent in 2022 to 6.0 percent in 2023, subsequently moderating to 3.6 percent in 2024, aligning with the 2–4 percent inflation target.
The ASEAN+3 Macroeconomic Research Office (AMRO) has released its 2023 Annual Consultation Report on the Philippines, based on assessments conducted in August-September 2023. AMRO's focus on the ASEAN+3 region aims to bolster macroeconomic and financial resilience and stability.
Amid challenges, the Philippines' GDP growth in 2023 remains robust, driven by factors such as resilient household consumption, improving labor market conditions, lower inflation, increased overseas remittances, and higher government infrastructure spending.
The banking sector exhibits improved profitability, ample liquidity, and a strong capital buffer, while the fiscal position is fortified by robust revenue collection and prudent spending.
Short-term concerns encompass the impact of high inflation, economic slowdown in major trading partners, and volatility in global financial markets. Long-term challenges include pandemic-induced scarring effects, sluggish infrastructure development, geopolitical risks, and economic vulnerabilities to extreme weather events.
Policy recommendations advocate addressing high inflation through combined monetary and fiscal tightening, implementing an "all-of-government approach" with targeted subsidies, and actively utilizing macroprudential tools for financial stability.
Fiscal policy should strike a balance between restoring fiscal buffers and supporting sustainable growth. Long-term economic growth can be fostered through skills upgrading, attracting investments, promoting exports, investing in infrastructure, digitalization, and fostering a green economy.
