Philippine economy

[ANALYSIS] Fastest economic growth in 46 years? Some context and caveats

JC Punongbayan

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[ANALYSIS] Fastest economic growth in 46 years? Some context and caveats

David Castuciano

Achieving 9.44% growth yearly is a feat I doubt the Marcos administration will ever achieve – and one they definitely can’t achieve by just resorting to their PR machinery.

Economic officials gleefully reported on January 26 that the Philippine economy grew by 7.6% for the entire 2022. 

They pointed out that that’s the fastest growth on record since 1976, or in 46 years (Figure 1). It’s also a little over their 2022 target of 6.5-7.5%.

At the same time, they boasted that the economy grew by 7.2% in the last quarter of 2022, despite skyrocketing prices.

Figure 1.

What can we make of these numbers? Is the economy truly in tip-top shape? 

Not entirely. Data suggest that we could, in fact, be growing a lot faster than this. So, 7.6% is arguably disappointing. Let me share with you here some context and caveats behind the numbers.

First, growth is so high in 2022 because the economy dropped so low during the pandemic. 

Recall that in 2020, total production – as measured by GDP or gross domestic product – dropped by almost 10%. That’s the worst economic downturn of the Philippines since the 14% decline during Martial Law in 1984 and 1985 (believe it or not, that crisis remains the country’s worst postwar recession, even taking into account the pandemic).

Figure 2 shows that as of 2021, total output was still 4% below the pre-pandemic level in 2019. It was not until late 2022 that GDP went back to its 2019 levels.  

Figure 2.

Do you remember 2021 – or was it all a blur? Our economy was still under much stress then. Lockdowns were still in place, we were still wearing face shields, mass vaccination was just getting started, children were still having classes online (they didn’t go back to school until November 2022), and the Duterte government was still denying the poor aid or ayuda.

That’s the economy we are comparing against to compute the 2022 growth rate of 7.6%. We were coming from such a low base in 2021, so naturally any recovery in 2022 will register as a sizable growth rate. 

Long story short, the 7.6% growth in 2022 still bears this so-called “base effect.” One of my Twitter mutuals, Doc Ligot, unearthed an old tweet of mine back in January 29, 2021: “I’m worried about base effects. For sure gov’t will trumpet the ‘impressive’ growth rates no end.” True enough…

But now that our lives are returning to normal (traffic is so bad again, kids are back to school, etc.), such base effects will disappear in 2023, and this year we’ll see the true nature of growth. Magkakaalaman na

Revenge spending, elections

Apart from base effects, another thing that propped up growth in 2022 is the so-called “pent-up demand,” more popularly known as “revenge spending.”

After two years under lockdown (2020 and 2021), Filipinos just couldn’t wait to go out, eat at restaurants, book hotels and flights, and spend their money in 2022 – anything to give them a sense of normalcy, to try out things they haven’t done in two years.  Higher demand means more consumption, and therefore more spending and income and production. Hence, high growth.

People also seem to be spending despite rising prices of certain commodities like bread and vegetables like red onions, and despite not having too much savings. (READ: Inflation, ’di hadlang sa gastos ng mga Pinoy?)

Yet another thing made 2022 special: elections happened. And historically, elections bring about a boost in spending especially in the first quarter (January to March).

Figure 3 shows that growth clocked in at 8.15% in the first quarter of 2022. Note, though, that growth has been declining since then. In fact, the 7.2% growth in the last quarter of 2022 was the year’s lowest. 

Figure 3.

The thing is, growth in 2022 could have been a lot higher had President Bongbong Marcos done his job to abate inflation. 

You see, if prices are skyrocketing, you’re more likely to have second thoughts about eating out at a restaurant or booking flights. Many analysts surmised that inflation might have eaten away at growth in 2022.

This is somewhat validated in the data. Figure 4 shows that the growth of private households’ consumption slowed down throughout 2022. In the 4th quarter, consumption spending contributed less than half of what it did in the 1st quarter. Spending on transportation and restaurants is also a lot lower in the last quarter of 2022.

Figure 4.

Aside from consumption, investment spending is also a huge driver of growth historically. But investments have contributed a lot less to growth in recent quarters (Figure 5). 

Even if the economy is reopening a lot, many investors may be thinking twice before investing huge sums into new operations, or expanding their current operations, because of the rising costs of inputs like construction materials or parts used in manufacturing. High inflation is painful for investors, too.

If the Marcos government really wants to prop up growth in 2023, they need to address inflation once and for all – something they’ve miserably failed to do and pay attention to in 2022. (A few weeks in office, Marcos Jr. “disagreed” with the latest inflation statistics then, adding, “We’re not that high…”)

Figure 5.
Agri, industry stagnating

In terms of sectors, the bright spot continues to be the service sector (Figure 6). 

Services grew a lot in 2022, but that’s easy to understand because they suffered a lot during the lockdowns. (Remember the crises among, say, PUV drivers and salespersons when transportation and malls closed down.) Now that the economy has all but fully reopened, most service workers are back in business.

Figure 6.

But note as well in Figure 6 that industry’s contribution to growth has been declining since early 2022. 

Meanwhile, the agriculture sector even shrank by 0.3% in the last quarter of 2022, and this manifested in the short supply of basic agricultural commodities like red onions. This reflects terribly on the agriculture secretary, who happens to be Marcos Jr. himself. Time to appoint a full-time secretary?

Tall order

Finally, the 7.6% growth is not so impressive compared to the 9.18% growth needed for us to fully recover and get back on our feet completely.

You see, more than getting back to its pre-pandemic level, GDP needs to go back to its pre-pandemic trajectory. Other economies, like the US, have already fully recovered in this sense. Sadly, we’re still a long way off from that.

Last year I projected that the Philippine economy must grow yearly at a rate of 9.18% per year, from 2023 all the way up to 2028, if we are to return to the pre-pandemic trajectory of output by the end of Marcos Jr.’s administration.

But now that 2022 growth has come in at just 7.6%, we will now need to grow by 9.44% yearly until 2028 if full recovery is to be met within the Marcos Jr. administration (Figure 7). 

If the Marcos government settles with 7.6% growth annually, Figure 7 shows we will never converge with our pre-pandemic trajectory. In that sense, the economic scars from the pandemic will prove deep and permanent. Sad.

Figure 7.

Achieving 9.44% growth yearly is a feat I doubt the Marcos administration will ever achieve – and one they definitely can’t achieve by just resorting to their PR machinery. They can’t vlog their way out of this one. –

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of the forthcoming book, False Nostalgia: The Marcos Golden Age Myths and How to Debunk Them. JC’s views are independent of his affiliations. Follow him on Twitter (@jcpunongbayan) and Usapang Econ Podcast.

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JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for He is also co-founder of and co-host of Usapang Econ Podcast.