PH GDP forecast to sustain 6-7% growth rate in coming years despite global uncertainties

By: Ron Castro | February 9, 2023

Source: The Independent Investor

With the lingering effects of the pandemic having disrupted many growth plans and trajectories of businesses, companies like the MFT Group and The Foundry are hopeful business activity will return to pre-pandemic levels sooner than later. Understanding both economic and socio-political realities in 2023 is a step in this direction.

While the Philippines’ economic performance and its political scene may appear to be symbiotic on the surface, the view of seasoned economists may surprise you.

Experts point out that the Philippine economy, under the past three administrations since 2012, had its gross domestic product (GDP) grow at a steady average of 6-7%. The same set of experts predicts the GDP to continue its growth and even rise to 8-10% under the current administration of President Marcos Jr.

Earlier this week, the MFT Group of Companies and The Foundry, in collaboration with the University of Asia and the Pacific (UA&P), hosted a panel discussion composed of esteemed economists and political scientists providing insights on the challenges, prospects, bright spots and warning signs faced by the Philippines in 2023. The event was held in the Li Seng Giap Auditorium inside the UA&P campus in Pasig City to a large audience of local and foreign investors, entrepreneurs, members of the academe and the business media.

MFT Group is a Private Equity Firm that primarily invests in industries including Healthcare, Financial Services, Food & Beverage and Real Estate across global markets.

“By providing this exclusive and intimate experts’ briefing, we would like to inspire confidence beginning with our own portfolio companies’ stakeholders and business partners to set their 2023 growth plans into motion,” said Mica Tan, founder and CEO of the MFT Group of Companies.

The economic and political briefing’s title “Haharapin Natin” (“We will face it” in English) was inspired by the MFT Group’s 2023 corporate theme. With the lingering effects of the pandemic having disrupted many growth plans and trajectories of businesses, companies like the MFT Group and The Foundry are hopeful business activity will return to pre-pandemic levels sooner than later. Understanding both economic and socio-political realities in 2023 is a step in this direction.

The panel of experts included Dr. Bernardo M. Villegas, executive director of the Center for Research and Communication, economist and former presidential adviser; Dr. Victor A. Abola, executive director of the UA&P-FMIC Capital Market Research Alliance, UA&P Economics professor and advisor to the Department of Trade & Industry ecommerce roadmap; and, Dr. Robin Michael Garcia, UA&P Political Economy professor and CEO of WR Numero Research.

Opening Remarks – Setting the Tone

“In an online briefing I held last year, I said that whoever becomes president, elected in June, a 6-7% growth is guaranteed whatever the global situation may be,” said Dr. Villegas in his introductory remarks.

Dr. Villegas also pointed out that economic growth numbers remained consistent through different administrations. “I showed you a graph showing the GDP from 2011 to 2016, a period that was shared by presidents Noynoy Aquino (2011 to 2016) and Rodrigo Duterte (2016-2019). It was graphically shown that whatever the differences between the two presidents, 6-7% (GDP) was attained year in and year out,” Dr. Villegas added. “This gave me the historical confidence that this will also happen in the present administration.”

Dr. Villegas also emphasized that the 7.6% growth reported in 2022 was made possible due to more than 30 years of slow and painful institution-building and policy reforms. He also affirmed that these institution-building initiatives and policy reforms are key to maintaining the 6 to 7% annual growth rate regardless of who sits in power. Finally, Dr. Villegas forecast this growth will continue as long as the President does not undo these institutions built nor change the economic reform policies.

Yet Dr. Villegas also stressed it is still possible to go beyond current growth rates. This is possible if President Marcos Jr. overcomes three key challenges he identified as: 1) to make agriculture grow from 2-3% every year under his watch, 2) to increase the very low investment rate in the Philippines from about 21-22% to more than 30% which is the average of East Asia, emphasizing the need to tap on foreign direct investment targeting $15-20B a year, and 3) to improve significantly the country’s rating of good governance by fighting corruption.

“If BBM (President Marcos Jr.) meets three challenges, our growth rate will be more than 6 to 7%, more like 8 to 10%,” said Dr. Villegas.

Economic Briefing Highlights – A Glimmer of Light

In his briefing on the 2023 macro-economic outlook, Dr. Abola provided a similar, optimistic view as Dr. Villegas. He first outlined the current global headwinds, which include the Russia-Ukraine war, a looming global economic recession, rising interest rates, and elevated inflation as the main challenges this year.

That said, Dr. Abola believes there is hope for the global economy, citing the easing of crude oil prices, slower wheat and industrial commodity prices, and the slowdown of monetary policy restrictions.

According to Dr. Abola, the Philippine economy likewise shows “a glimmer of light,” stating how our economic growth may somewhat be insulated from the global environment given how it is “mainly driven by domestic demand, infrastructure spending and consumer spending through record employment levels, cuts in personal income taxes, and growing consumer sentiment” among others.

Dr. Abola shared his 2023 year-end Macro-economic Forecasts, as follows:

When probed about the overall impact of a further Peso depreciation being forecasted by year-end, Dr. Abola was confident this will benefit the country overall with the increasing value and volume of OFW remittances, as well as the economic uplift to Filipino exporters. Citing Bangko Sentral ng Pilipinas (BSP) data on OFW remittances, he highlighted positive upticks year on year for the past 19 months to October 2022, and a 3-5% projected growth rate in 2023.

Other caveats include the lingering food inflation, a possible invasion of Taiwan by China, and a global economic meltdown. However, Dr. Abola emphasized these had low probabilities of occurring.

Political Briefing Highlights – A Positive but Cautious Outlook

Dr. Garcia capped the briefing session with his assessment of the political landscape in the early stages of the Marcos Jr. presidency.

His summary of the political outlook and associated risks include the economic centricity of the Marcos administration, contentious legislation, the present battle of economic narratives, what he sees as the four emerging poles of power, power transitions in the Executive branch, and the changes in foreign policy.

Compared to the previous Duterte administration’s focus on the drug war, he noted that President Marcos Jr. established his administration’s focus on the economy early on, like addressing the agricultural sector issues. According to Dr. Garcia, it is worth noting that the president announced his 8-point socio-economic agenda, commitment to Build Better More (BBM), and the creation of the Private Sector Advisory Council as the key drivers of the administration’s economic strategies.

“An economy-centered approach is really not mandatory for any president,” said Dr. Garcia, noting how past presidents had their own priorities during their respective administrations. “President Benigno Aquino III prioritized institution and governance building, President Gloria Arroyo, despite being an economist, focused on conditional cash transfer, poverty reduction, and investments, while President Rodrigo Duterte prioritized the war on drugs and infrastructure building,” he said.

Dr. Garcia also elaborated on what he sees as the emerging battle of economic narratives facing the Marcos Jr. regime.

“In the past, the Duterte’s administration’s discursive space was filled with issues on human rights and sovereignty,” said Dr. Garcia. “Presently, the idea of economic progress as it alludes to Marcos Sr.’s ‘golden age of infrastructure’ has become the centerpiece of the revivalist narrative of the Marcoses,” he added.

That said, Dr. Garcia believes this administration is in a battle to reshape structural economic realities such as inflation, rising princess of oil and onions, and the GDP, which some sectors of society like the opposition can reframe against the president.