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.

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