As delivered Press Statement of NEDA Secretary Arsenio M Balisacan on the Philippine Economic Performance for the First Quarter of 2023

Colleagues in government, members of the media, fellow Filipinos—

Good morning!

I am pleased to inform you that our gross domestic product or GDP in the first quarter of 2023 grew by 6.4%, as the Philippine Statistics Authority reported. This growth performance is higher than the median estimates of analysts reported by the media and well within the government’s target of 6.0% to 7.0% for 2023. Moreover, among major emerging economies in the region that have released their first quarter 2023 real GDP growth so far, the Philippines grew the fastest, followed by Indonesia (5.0%), China (4.5%), and Vietnam (3.3%). The country’s growth is also more rapid than the forecasted first quarter growth rates for Malaysia (4.9%), India (4.6%), and Thailand (2.8%).

While this quarter’s growth figure is lower than the 8.0% year-on-year growth rate recorded in the first quarter of 2022, we need to exercise caution in interpreting this as a slowdown since the previous year’s growth came from a low base. Rather, the economy is normalizing its previous trend. The better-than-expected first-quarter performance this year implies that we are returning to our high-growth trajectory despite the various challenges and headwinds we have faced. However, we have much more work to realize our social and economic transformation agenda toward a prosperous, inclusive, and resilient Philippines.

On the demand side, gross fixed capital formation or investment expanded at a rapid pace of 10.4% year-on-year, faster than household final consumption expenditure (6.3%) and government final consumption expenditure (6.2%), reflecting a robust public construction performance primarily driven by the road infrastructure and railway projects of the Department of Public Works and Highways and the Department of Transportation. However, exports of goods and services only increased by 0.4% in the face of weak global demand, while imports of goods and services rose by 4.2%.

On the supply side, all major economic sectors recorded positive growth this quarter. Agriculture grew by 2.2%, Industry grew by 3.9%, and Services saw a significant increase of 8.4% with the full resumption of economic activity. Agriculture’s performance this quarter – primarily due to favorable weather conditions – is a promising beginning to 2023, especially given the expected challenge of El Niño later in the year. We have experienced El Niño before and are confident that with adequate planning and preparation, we can successfully navigate it again this year.

The performance of these sectors translates into the latest labor force statistics, showing improvements not only in terms of a lower unemployment rate, from 5.8% in March 2022 to 4.7% in March 2023, but also in terms of a lower underemployment rate – notably, the invisible underemployment rate, which declined from 5.6% in March 2022 to 3.5% in March 2023. Recall also that the sectors of transportation and storage; accommodation and food service activities; wholesale and retail trade; and construction are among those with the highest year-on-year increases in employment in March 2023, indicating that strong pent-up demand persisted in the first quarter of this year.

Despite this rather auspicious beginning for 2023, we, in the Economic Team and the whole government, have to remain vigilant. While we remain focused on implementing our social and economic transformation agenda, we also stand ready to respond to the shocks and risks to our growth outlook – both domestic and external, foreseen and unforeseen.

High inflation remains a challenge, and the Bangko Sentral ng Pilipinas’ move to raise its key policy rates to anchor inflation expectations and ensure price stability, may dampen future growth. But the improvement in business climate can counter this unintended effect.

Still, the headline inflation rate appears to have reached its highest point, decelerating to 6.6% in April 2023 from 7.6% in March and 8.6% in February 2023. We anticipate this downward trend to continue as inflation eventually eases toward the government’s target range by the fourth quarter of 2023. Indeed, the latest inflation report numbers look promising: food inflation declined from 9.5% in March to 8.0% in April 2023, while non-food inflation declined from 6.3% in March 2023 to 5.5% in April.

Ensuring that we not only go back to our high-growth path but, more importantly, achieve significant social and economic transformation by the end of this administration’s watch, involves fully implementing the strategies laid out in the Philippine Development Plan 2023-2028. The strategies call for developing and protecting the capabilities of Filipinos and transforming our production sectors to generate more quality jobs and competitive products while ensuring a conducive overall investment environment in terms of governance and government policies.

In developing and protecting the capabilities of Filipinos and enhancing the prospects for sustained growth, it is crucial to address the rising costs of food and energy, especially since these disproportionately adversely affect the welfare of low-income and vulnerable individuals, as food items tend to dominate their consumption patterns. Through the recently approved Inter-Agency Committee on Inflation and Market Outlook, we endeavor to promptly anticipate food and energy market conditions and generate evidence-based and timely recommendations to the President and the Cabinet, especially in light of the looming threat of El Niño on our food and energy supplies. Our policy prescriptions shall be a balancing act, considering the overall impact on different sectors of the economy, including local producers and consumers.

Despite various risks and challenges, the economic outlook for the Philippines in the near and medium term remains solid. We are confident that we will reach our target for this year of 6.0 to 7.0 percent growth rate and 6.5 to 8.0 percent for 2024 to 2028.

The Filipino people can rest assured that we are committed to achieving rapid, sustained, and inclusive economic growth. We strongly encourage everyone to contribute to building a prosperous, inclusive, and resilient Philippines.

Maraming salamat at mabuhay.

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