This year’s forecast rides on the momentum of a 7.7 percent growth in the first three quarters of 2022, buoyed by the removal of remaining restrictions on people’s mobility and business operations and the recovery of incomes and jobs. The reopening has benefitted the services sector, and government spending on infrastructure fueled the growth of construction and industry.
The forecast for 2023 is premised on reduced consumer demand, alongside high inflation and high interest rates that are expected to temper household spending and investments.
Higher interest rates will likely constrain growth of private lending and investments at a time when public spending will likely slow as the country undertakes “fiscal consolidation” or implements measures to rein in government deficits and reduce debt. Also, as global growth is expected to decelerate next year, external demand from advanced economies, which are key buyers of Philippines merchandise exports, will be subdued.