Insights & blogs
Sep 06, 2023
Economic update

The Philippine economy expanded by 7.6% in 2022 after growing by 5.7% in 2021. In the 1st half of 2023, the economy grew by 5.3%. 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 8.3% in 2022 and 6.0% in the 1st half of 2023, driven by pent-up demand and the expansion of ecommerce. Consumers have started to spend more again on high-contact services and non-essential items, unlike in the past 2 years 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 13.8% in 2022 and 5.4% in 1H 2023. With consumer demand now back to normal, businesses have ramped up their capital expenditures to expand their capacity.

The agriculture sector continues to struggle amid long term productivity issues and the influx of imports from abroad. Meanwhile, the industry sector has posted a growth rate of 6.5% in 2022 and 3.0% in 1H 2023 amid the strong demand for manufactured goods and the surge in metal prices. Construction has underperformed due to the lack of new projects as the real estate sector continues to deal with the challenges brought by COVID like elevated vacancy rates in the office segment and gradual recovery in residential demand. As for services, the sector has posted the biggest growth rate among the major sectors at 9.2% in 2022 and 7.2% in 1H 2023. The shift in consumer spending from goods to services is one of the factors that have led to this.

Inflation was faster in 2021 at 3.9% amid supply constraints and improving demand causing the Peso to depreciate. In 2022, inflation went up further with oil as the main driver. Average inflation for the year settled at 5.8%. Looking ahead, inflation may stay at elevated levels in the coming months due to persistent risks like supply constraints. It may go down in 2023 due to lower commodity prices, but at a gradual pace amid production issues in agriculture and as supply chains continue to adjust to the surge in demand amid the reopening of economies.

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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