“Recent positive developments in the economic front indicate a good job by our economic managers”
If key indicators are any gauge, the economy has nowhere to go but up in the months ahead.
The country’s inflation rate slid to 4.7 percent in July, the slowest in 15 months or since the 4.9 percent recorded in April 2022, according to the Philippine Statistics Authority.
The continuing decline in the inflation rate, according to experts, is due mainly to slower increases in prices of electricity, home rentals, and liquefied petroleum gas; meat, fish and other seafood, and sugar, confectionery and desserts; as well as road transport and airfares.
This was the sixth straight month that inflation, or the rate of increase in the prices of goods and services that households commonly buy, decelerated.
The July figure is below the private-sector analysts’ median estimate of 4.9 percent but within the forecast range for the month of the Bangko Sentral ng Pilipinas (BSP), which was 4.1 percent to 4.9 percent.
According to Finance Secretary Benjamin Diokno, “we are over the hump.”
For the BSP, the July figure brings the average since January at 6.8 percent, which is still much higher than its target full-year average of within 2 percent to 4 percent.
But it expects the monthly readout to ease into the target band toward the end of the year, and likely even go below the lower-end range in early 2024.
Hence, while households and businesses seem to have passed the period of high inflation, they have yet to hurdle high interest rates.
BSP Governor Eli Remolona Jr. has been quoted in news reports as saying that the central bank is not ready to cut its benchmark policy rate, which is currently at 6.25 percent.
“We’re not out of the woods yet,” he said.
“Because of supply-side factors, we are continuing to watch the [inflation] data and we (must) be ready to raise the policy rate if necessary during the next meeting of the Monetary Board.
The BSP chief acknowledged that inflation rates have been going down, but also noted that inflation figures in the coming months could turn out higher than forecast because of the possible impact of El Niño on food production.
Apart from supply factors, the government faces risks from the possible impact of additional transport fare increases, higher-than-expected minimum wage adjustments in other regions, and higher toll rates on prices of key agricultural items.
Another piece of good news is that the unemployment rate in the country declined to 4.5 percent in June 2023 from 6 percent a year ago, according to the Philippine Statistics Authority.
The employment rate in June was estimated at 95.5 percent.
This was higher than the reported 94.0 percent registered in the same month last year, but slightly lower than 95.7 percent in May 2023.
In terms of magnitude, the number of employed persons was posted at 48.84 million in June 2023, compared to 46.59 million in June 2022.
The number of unemployed persons in June decreased to 2.33 million from 2.99 million in June 2022, posting a year-on-year decline of 663,000.
This is good news for those looking for jobs.
The National Economic and Development Authority reaffirmed the government’s commitment to labor upskilling to improve employability and maximize the benefits of the country’s demographic dividend.
Apart from the lower inflation rate in July, another indication that the economy is on an upward growth trajectory is the possible expansion of the gross domestic product (GDP) above six percent in the second quarter of this year.
Economist professor Alvin Ang of Ateneo de Manila University believes economic growth is likely to pick up slightly to 6.5 percent in the second quarter from 6.4 percent in the first quarter.
He sees second quarter GDP growth due to continued spillover consumption growth, particularly supporting travel, transportation and recreation.”
He also noted that better weather during the second quarter also increased construction and agricultural activities.
Chief Economist of Security Bank Robert Dan Roces said the economy likely expanded by 6.1 percent between April and June.
The growth would result from robust consumer spending, improved exports and increased private investments.
Steady private consumption, reduced inflation and relatively stable business sentiment would also boost GDP growth, but there are also risks: sticky inflation, elevated interest rates and weaker global economic growth.
Chief Economist of Rizal Commercial Banking Corp. Michael Ricafort thinks the economy likely grew by six percent in the second quarter from 6.4 percent in the first quarter.
He predicted the country’s GDP growth may normalize at around six percent this year and in the next five to 10 years amid the country’s demographic sweet spot, with the majority of the population of more than 110 million at working age since 2015.
The Philippine economy, he said, is already back to pre-pandemic levels in peso terms at both current prices and constant 2018 prices after two years of the pandemic.
But challenges remain: inflation is expected to hover around four percent in the third quarter and three percent in the fourth quarter after easing for the sixth straight month to 4.7 percent in July from 5.4 percent in June.
All told, recent positive developments in the economic front indicate a good job by our economic managers.
But we must emphasize that consistent growth should benefit the disadvantaged and vulnerable sectors and make a dent in reducing poverty levels in the years ahead.
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