POSTSCRIPT / December 29, 2022 / Thursday



Share This

Why PHL may bounce back in 2023

CONFIDENCE and optimism mark the yearend briefer of Finance Secretary Benjamin E. Diokno, head of the administration’s economic team. Giving nine reasons for his positive prognosis, he says:

After the highly unprecedented pandemic, followed by Russia’s invasion of Ukraine and a weakening China growth, the global economy is likely to face a mild recession next year. But for the Philippines, the worst is over, and better years are expected.

Finance Secretary Benjamin E. Diokno gives nine reasons for his positive prognosis of the Philippine economy in 2023. Photo: GMA Network

All things considered, the Philippines did very well in 2022 – both politically and economically. The 2022 presidential and local elections were peaceful and the transfer of power was frictionless. Both feats should be the envy of most democratic governments. President Marcos’ absolute majority win – 31 million votes or 58.7 percent of the total votes cast – gives him a strong mandate to push further game-changing reforms.

2022 Economic Growth Exceeding 7.5% is Doable

On the economy, after a modest recovery in 2021, the Gross Domestic Product will likely grow much faster than the official target range of 6.5 to 7.5 percent this year. All sectors will be surging, led by manufacturing and construction, while strong domestic demand is supplemented by exports. Employment rate, a key metric in a labor-rich country, has exceeded pre-pandemic levels, creating some 4.6 million new employment.

The manufacturing sector is one source of optimism. The S&P Global Philippines PMI has mostly been on an expansion mode, reaching 52.7 percent index points in November. Jobs in the manufacturing sector increased by 10.42 percent in October 2022 year-on-year as improved sales signaled business expansions and higher capacity use. The expanded job creation is a sign of future growth prospects for the sector. Looking ahead, output expectation in the next 12 months remains optimistic with hopes of demand expansions.

The employment outlook is another source of optimism. Unemployment rate slid to 4.5 percent, lower than the 5.3 percent unemployment rate during the pre-pandemic period. There were 4.6 million new jobs in October 2022 compared to the level posted during the pre-pandemic period. Underemployment rate in October 2022 (14.2 percent) was lower than the January 2020 pre-pandemic period (14.8 percent).

More Filipinos 15 years and older have joined the workforce. The labor force participation rate (LFPR) in October was 64.2 percent, higher than the 61.7 percent recorded in the January 2020 pre-pandemic period.

Inflation, which has been a challenge for almost all countries – both developed and emerging – has been a major concern for Philippine authorities too. But for the Philippines, the outlook is that inflation will start to ease next year and will be within the target band of 2.0 to 4.0 percent by 2024.

This positive prediction is based on the very close coordination between monetary and fiscal authorities and the falling prices of oil and related commodities.

Oil prices, a major source of imported inflation, have gone back to levels before the Russia-Ukraine conflict amid worries over global demand outlook. Rising COVID cases and the strict quarantine measures in China have had dampening effects on crude oil prices and other energy commodities.

In brief, the oil futures market remained in backwardization as of 29 November 2022, owing to weak demand due to production disruptions in China, tighter global financial conditions, and deteriorating world growth prospects.

Economic Outlook for 2023

Many institutions and experts have predicted a global recession in 2023, and consequently, downgraded Philippine GDP growth outlook to less than 6 percent. The Development Budget Coordination Committee (DBCC) predicts that the Philippine economy will grow by 6.0 to 7.0 percent in 2023 in the face of external headwinds. But an average GDP growth of 6.5 percent is nothing to be sneezed at: it is still one of the highest, if not the highest, growth rates among ASEAN+6 economies.

There are many reasons for this optimistic view.

First, the early approval of the 2023 national budget. This means that the programs and projects of the national government will start to run from day one of the new year. This is especially relevant for public construction which is about one-fifth of the ₱5.2 trillion national budget. Ideally, public construction has to start in the first half of the year because of the favorable weather conditions: more sunny, less rainy, days.

Second, the early adoption of the first-ever Medium-Term Fiscal Framework, (MTFF) FY 2023-2028, which President Marcos unveiled in his State of the Nation Address. The MTFF serves as the new administration’s North Star as it pursues economic and social transformation within a regime of fiscal consolidation. In the spirit of national unity, the MTFF was swiftly embraced by both Houses of Congress through a joint resolution.

As a result, both the Executive and Legislative departments of government are on the same page, pursuing the same national aspirations, at least for the next three years. This unprecedented achievement and display of unity may yet be the envy of all democratic governments in the world.

Third, the swift approval of the Philippine Development Plan 2023-2028. The PDP is a coherent Plan for Economic and Social Transformation that accelerates economic and social recovery towards inclusive and resilient prosperity. It puts flesh into President Marcos’ skeletal 8-point socioeconomic agenda which he mentioned in his first SONA.

Fourth, is the strong international credit profile of the country, even among higher-rated peers. In a sea of downgrades as a consequence of the pandemic, major credit agencies (Moody’s, S&P, and Fitch) have maintained the Philippines’ investment-grade credit ratings.

Fifth, is the stable and resilient banking system, characterized by: strong capitalization well above international norms; rising assets funded mainly by deposits; satisfactory loan portfolio with low and falling non-performing loans (NPL) ratio; and strong liquidity position to fund requirements during shocks.

Sixth, the adequate buffers against external headwinds. The country has a hefty level of gross international reserves (US$95.1 billion, November 2022); low external debt/GDP ratio (26.8%, end September 2022); and a favorable external debt profile: by maturity (15.2% short-term, 84.8% medium and long term), by borrower (40% private sector, 60% public sector), and by interest type (56.7% fixed rate, 42.4% variable type, and 0.9% non-interest bearing). In addition, the country has a steady supply of foreign exchange from overseas Filipino remittances, export revenues from Business Process Outsourcing firms, tourism receipts, and inflows from foreign direct investments.

Seventh, a more favorable economic environment that removes barriers to foreign investments and further opens economic sectors to foreign equity. The government has crafted policies that allow for more participation in Philippine industries. Foreign investors can have 100-percent ownership of micro and small domestic enterprises with a paid-in equity capital of US$100,000 but not to or more than US$200,000, subject to some conditions.

The Retail Trade Liberalization Law was amended to allow more foreign players in the retail market by lowering the minimum paid-up capital for foreign corporations from US$2.5 million (₱125 million) to US$500,000 (₱25 million), and removing the required net worth, number of retailing branches, and retailing track record conditions.

The Public Service Act was amended to allow up to 100-percent foreign ownership of public services such as telecommunications, airports, railways, shipping and expressways. These game-changing laws are expected to boost foreign direct investments, in particular, and the economy, in general.

Eighth, the young, tech-savvy, mostly English-speaking labor force. In an aging world, this is a formidable asset. The government has to deliver on its commitment to invest in its people to develop them into an agile, competent, and competitive workforce by investing in their education and health care.

Ninth, the strong commitment to continue and further expand the “Build, Build, Build” program, but with a twist – now with enhanced private sector participation. The Implementing Rules and Regulations of the Build-Operate-Transfer Law was amended within the first 100 days of the Marcos administration to create a more competitive and enabling environment for public-private partnership (PPP) for infrastructure development.

As of 31 October 2022, there are 283 PPP projects (206 under implementation, 77 in the pipeline) worth ₱5.3 trillion. Moreover, the government is committed to keep 5% to 6% infrastructure spending-to GDP ratio for 2022-2028.

As long as the country stays united and its political leaders and policy makers remain focused on economic growth, the Philippines’ future remains bright. The trajectory of its growth will make the country one of the leading economies in the Asia-Pacific region.

News RoundUp

CNN PhilippinesDeath toll from heavy rains, floods during holiday weekend rises to 39
Read More
The National Disaster Risk Reduction and Management Council said the death toll from the heavy rains and floods during the Christmas weekend has risen to 39. The NDRRMC also noted in its 6 p.m. report that 11 of the deaths were already validated. (Dec. 29)
CNN PhilippinesPhilSA warns of possible debris from Chinese satellite launch
Read More
In an advisory by the Civil Aviation Administration of China, rocket boosters and payload fairing from Long March 3B is “expected to fall within a drop zone area located within the vicinity of Recto bank – approximately 137 kilometers from Ayungin Shoal and 200 kilometers from Quezon, Palawan.”
CNN PhilippinesFDA approves emergency use of Moderna, Pfizer bivalent vaccines
Read More
The Department of Health confirmed that the Food and Drug Administration has granted emergency use authorization for bivalent vaccines of Moderna and Pfizer. DOH officer-in-charge Maria Rosario Vergeire said the health agency will release recommendations and guidelines for the priority...
CNN PhilippinesDTI records all-time high business name registrations in 2022
Read More
The Department of Trade and Industry (DTI) recorded an all-time high of 932,097 business name registrations in 2022. In a statement on Wednesday, the DTI said 827,491 (88.8%) are new registrations while 104,606 are renewals. (Dec. 29)
CNN PhilippinesServer issues mar early hours of SIM registration
Read More
Subscribers who wanted to register their SIMs early were greeted by server issues despite the telecommunications companies' assurance they are ready to accommodate the deluge of registrants. (Dec. 27)
CNN PhilippinesTelcos: We are ready for SIM registration
Read More
The country's mobile service providers assured subscribers they will be accommodated once the period to register their subscriber identification module begins on Tuesday, Dec. 27. Representatives from Globe, SMART, and DITO Telecommunity laid out plans for their subscribers as well as... (Dec, 27)
CNN PhilippinesDOJ opposes DSWD plan to demand child support from negligent fathers
Read More
The administration of President Ferdinand Marcos Jr. exceeded its revenue target for 2022 by 2.2%, the Office of the Press Secretary announced Sunday, citing a report from the Department of Finance. (Dec. 27)
CNN PhilippinesOver 21K Filipinos visit Malacañang for Christmas activities
Read More
Over 21,000 Filipinos have visited the Malacañan Palace to attend the Simbang Gabi and view the Christmas tree and lantern displays at the Kalayaan grounds. In a statement on Sunday, the Office of the Press Secretary said there were 2,895 attendees for the Simbang Gabi from Dec. 17 to 24.
CNN PhilippinesOver 16,000 DepEd teachers, staff hired in 2022 — OPS
Read More
The Department of Education hired more teachers and administrative officers in 2022 to address the "learning losses" of Filipino students amid the pandemic, the Office of the Press Secretary said Sunday. (Dec. 27)
CNN PhilippinesWomen inmates visit husbands at NBP on Christmas Eve
Read More
It was an emotional Christmas Eve for around 35 inmates from the Correctional Institution for Women and their husbands incarcerated at the New Bilibid Prison in Muntinlupa City. The Bureau of Corrections allowed them to be reunited at the national penitentiary in the spirit of... (Dec. 27)



Share your thoughts.

Your email address will not be published.