MALAYBALAY CITY (PIA)—The Philippine economic growth is projected to weaken in 2023 as the global economic environment deteriorates.
This was found in a recent study by the Philippine Institute for Development Studies (PIDS), which was written by Senior Research Fellow Margarita Debuque-Gonzales, Supervising Research Specialist John Paul Corpus, and Research Analyst Ramona Maria Miral.
In the PIDS Economic Policy Monitor (EPM) from last year, the authors predicted a "rough recovery" from the COVID-19 pandemic, taking into account things like temporary quarantines and low confidence among businesses and consumers.
In their recent paper, the authors say that they think things will be rough this year and next, because the country is facing a new set of headwinds. For example, inflation is becoming a global problem, which is leading to a tightening of money around the world, which is a sign of a general slowdown.
"Financial volatility in advanced countries has been spilling over to emerging market economies, increasing the complexity of issues and challenges faced by local policymakers in these places," they added.
With the country’s sustained economic reopening, the gross domestic product (GDP) may grow by about 7.1 percent in 2022, which is within the government’s target of 6.5 to 7.5 percent. However, 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. This is below the 6.5 percent target that the current administration has set for 2023.
Debuque-Gonzales and her coauthors outlined key priorities that policymakers should consider to steer the economy through global headwinds.
One is to control inflation without harming growth. Taming rapid inflation can be "difficult and extremely costly," according to the authors, so careful calibration is required to avoid stifling economic recovery.
Another is smoothing exchange rate volatility while maintaining flexibility.
"Avoiding severe exchange rate fluctuations should be a priority. However, the appropriate response must again depend on the nature of the exchange rate shock as well as its impact on the monetary and financial sectors," the authors said.
They also urged the government to try to keep its finances in good shape, but they stressed the need to protect people who are at risk from the effects of the pandemic and rising prices.
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 also urged the current administration to address pandemic scars and continue the policy momentum on investments.
This press release is based on the PIDS study "Macroeconomic Prospects of the Philippines in 2022-2023: Steering through Global Headwinds," which will be released as the lead chapter of the 2021–2022 PIDS Economic Policy Monitor. (PIDS/PIA-10/Bukidnon)
