Insights & blogs
Apr 12, 2024

Economic update

Global GDP growth is expected to slow down in 2024 as economies continue to deal with inflation while absorbing the impact of rate hikes. While 2023 rate hikes were milder than in 2022, the adjustment process to higher borrowing costs may extend for a considerable duration.

The Philippine economy expanded by 7.6% in 2022 after growing by 5.7% in 2021. The economy has also sustained its recovery with a 5.6% growth in 2023. With mobility back to pre-pandemic levels after the lifting of COVID restrictions, economic activity has increased significantly in the past year.

Household consumption grew by 5.6% in 2023, partly driven by pent-up demand following the easing of restrictions and the expansion of ecommerce. Consumers have started to spend more again on high-contact services and non-essential items, unlike in the first 2 years of the pandemic when more than half of their budget were spent on essentials like food, housing, and utilities.

Investment spending has recovered further amid the improvement in the economic environment, growing by 5.4% in 2023. With consumer demand now back to normal, businesses have ramped up their capital expenditures to expand their capacity.

Inflation has finally settled within the target of the BSP after 22 months. However, it may accelerate again in the 2nd quarter with El Nino as the main driver. Supply of certain food items will likely remain tight until El Nino subsides. Inflation may ease in the 2nd half of the year, contingent on the conclusion of El Nino and its impact not being more severe than expected.

With the anticipated easing of inflation, consumer spending may recover in 2024. Growth of household consumption will likely continue to outpace that of our ASEAN peers given the favorable demographic profile of the country, combined with the continuous inflow of remittances from abroad and the declining rate of unemployment.

Investment spending may also grow faster now that adjustments in the construction sector have been made just as interest rates may have already reached their peak. Businesses may become more aggressive with their capital expenditures as the outlook for growth with lower inflation appears to be in place. Public construction will continue to be a major driver of capital spending as the government ramps up its infrastructure program.

The information contained herein is published by the Bank of the Philippine Islands (or the “Unibank”). It is based on information obtained from sources considered to be reliable, but the Unibank does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any purpose. All the charts and graphs are taken from publicly available sources or derived from proprietary data. Expressed opinions may be subject to change without prior notice. Any recommendation contained herein does not pertain to any specific investment objectives, financial situation and the particular needs of any addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees who should obtain separate legal or financial advice. The Unibank, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Unibank or any other person has been advised of the possibility thereof. The information herein is not to be construed as a solicitation to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Unibank and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
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