7.2% 4Q GDP growth

PHILIPPINES - In Brief 26 Jan 2023 by Romeo Bernardo

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The economy grew much faster than we had expected in 4Q with the 7.2% year-on-year (yoy) growth rate reflecting a 2.4% quarter-on-quarter growth clip. Features of 4Q growth include: Still robust consumer spending which grew 7%, slowing down from the previous quarter’s 8% growth. Despite rising inflation, strong net inflows from the rest of the world (growth in compensation incomes was sustained at close to 40% in 4Q) personal savings, and increased local employment in line with the removal of mobility restrictions supported continued private spending growth. A marked slowdown in investment growth, from above 20% in previous quarters to 5.9% in 4Q, reflecting both the deceleration in growth of fixed capital formation and reduced inventory accumulation. More modest public sector spending in line with government’s fiscal program.A shrinking of the trade deficit that added 1.5ppt to the headline growth rate in contrast to previous quarters’ negative contributions. 4Q performance brings the full year GDP growth rate to 7.6%, about 3% above the pre-pandemic level of output. At this time, despite the higher-than-expected growth, the numbers do not give us high confidence that the stellar performance will spill over to the coming quarters. In particular: Domestic demand growth, comprising private and public consumption and investments, is slowing down. With continuing fiscal consolidation efforts and signals from some conglomerates of more moderate capital expenditures ahead, the economy is left with mainly private consumption to drive growth. Consumption growth is unlikely to be sustained above 8% despite sustained incomes support from the expected rise in deployment of worke...