Philippine GDP

Philippine economy picks up, growing by 5.9% in Q3 2023

Ralf Rivas

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Philippine economy picks up, growing by 5.9% in Q3 2023

BUSINESS HUB. A view of the Makati City skyline on June 2, 2022.

Mau Victa/Rappler

(1st UPDATE) For January-September 2023, gross domestic product growth is at 5.5%, remaining below the government's full-year target of 6% to 7%

MANILA, Philippines – The economy grew by a higher-than-expected 5.9% in the third quarter despite elevated prices of goods, the Philippine Statistics Authority said on Thursday, November 9.

Gross domestic product (GDP) growth rebounded in the third quarter from the disappointing 4.3% recorded in the second quarter.

Analysts polled by BusinessWorld estimated third quarter growth would hit 4.9%.

Growth drivers

Per industry, agriculture grew 0.9%, while industry and services went up by 5.5% and 6.8%, respectively. 

So far, the Philippines is the fastest-growing economy in Asia among those that have released their third quarter GDP growth figures: Vietnam at 5.3%, Indonesia and China at 4.9%, and Malaysia at 3.3%.

Public spending has picked up by 6.7% from the 0.7% contraction a quarter ago.

National Economic and Development Authority Secretary Arsenio Balisacan commended the government agencies that implemented their catch-up spending plans. 

“These actions addressed the contraction in government spending in the previous quarter. We hope to maintain this momentum for the remainder of the year and the years to come,” he said in a press briefing on Thursday.

GDP also surprised on the upside due to net exports, increasing by 12.9% in the third quarter from the 8.5% posted in the second quarter.

Rizal Commercial Banking Corporation chief economist Michael Ricafort also cited election spending as a contributor to growth.

“Barangay and SK (Sangguniang Kabataan) election-related spending also provided a boost to the economy; as well as the continued recovery for many businesses/industries as the economy further reopened towards greater normalcy, leading to higher sales, incomes, jobs/employment/livelihood, and other business/economic opportunities,” he said.

For January-September 2023, GDP growth is at 5.5%, remaining below the government’s full-year target of 6% to 7%. To reach the goal, fourth quarter growth must hit at least 7.2%. Multilateral lenders and experts expect the government to miss the target.

The Bangko Sentral ng Pilipinas has aggressively hiked interest rates to restrain scorching inflation. The consequence, however, is a slowdown in economic growth. Average inflation for the year is at 6.4%, so far, still much higher than the target range of 2% to 4%.

Growth spoilers

A closer look at the numbers shows the pinch felt by households due to inflation. Household consumption has slumped to 5%, the slowest since the 4.8% recorded in the second quarter of 2021, amid food inflation rising 8.2%.

Gross capital formation, or the net accumulation of capital goods like equipment, transportation assets, and electricity, declined 1.6%, largely due to the substantial drawdown in inventories and the slowdown in durable equipment. 

Countries need capital goods to replace the older ones that are used to produce goods and services, which means that higher capital formation is needed for the overall economy to grow.

IBON Foundation executive director Sonny Africa described the third quarter growth as “job-destroying.”

“Over the same period, employment contracted 1.7% or by 825,000 to 46.8 million which goes far in explaining why the number of poor is growing despite hyped growth,” he said. – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.