Philippines' recovery expected to be robust amid high inflation: AMRO

AMRO was set up to contribute toward securing macroeconomic and financial resilience and stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China, Hong Kong, Japan and South Korea.

Gross domestic product (GDP) growth was robust in the first three quarters of 2023. Growth is forecast to moderate to 5.6 per cent in 2023 from a multi-decade high of 7.6 per cent last year, and to pick up to 6.3 per cent in 2024 as external demand recovers.

Inflation remained high in 2023, driven by buoyant demand and supply shocks. Headline inflation is expected to rise from 5.8 per cent in 2022 to 6 per cent in 2023, and then moderate to 3.6 per cent in 2024, within the 2-4 per cent inflation target.

The banking sector sees improved profitability, ample liquidity and sufficient capital buffer. The fiscal position continues to improve in 2023 due to strong revenue collection and moderate spending, the report says.

Despite weaker external demand, the growth momentum in the country is expected to be sustained by resilient household consumption reflecting an improving labour market, lower inflation, robust overseas remittances and higher government infrastructure spending.

On the external front, a widening current account deficit was partly offset by net capital inflows and the international reserve buffer remains adequate.

In the short term, the impact of high inflation on the economy remains the key concern. Economic slowdown in major trading partners, volatility in the global financial markets along with tighter financial conditions could also weigh down on growth outlook.

Over the medium to long term, the country’s growth potential faces several challenges, including the scarring effects of the pandemic, a slower pace of infrastructure development, heightened geopolitical risks, and economic losses from extreme weather events, the AMRO report says.

Fibre2Fashion News Desk (DS)