Economic Boost
Philippine is enjoying a historic economic boost. Ths country posted a growth rate of 7.6%, its fastest economic growth since 1976, and exceeded the expectation of the government's expected growth of 6.5%. The credit for this strong growth is given to domestic demand, increase in employment, increase in spending, circulation of money flow, and fully operational country since the pandemic. On a quarter-on-quarter basis, GDP growth from October to December was 2.4%, 0.9% higher than what was expected. The Philippine government is convinced that they are going to keep the growth of 6 to 7% in 2023 but they are aware of the risks involved and the difficulties ahead. The world's economy is slowing down and after the Ukraine war, rising inflation can force more policy tightening for the whole world. Apart from GDP growth, the Philippines is struggling against inflation, with record-high inflation for the last 14 years, and if not tackled in time, this high inflation can bring down the economy by decreasing domestic demand which is a major source of GDP growth for the country. The government is planning to have more strict monetary policies to bring inflation down from 8.1 to 2-4 in 2023.
https://www.aljazeera.com/economy/2023/1/26/philippine-economy-grows-at-fastest-pace-in-40-years
https://www.reuters.com/markets/asia/philippines-q4-gdp-grows-72-faster-than-forecast-2023-01-26/
4 comments:
it is very contradictory for the Philippines to say they can see 6 to 7 percent growth this year because they also want to tackle inflation. They will have to realize a cyclical recession/correction is imminent in order for their economy to grow in the very long run. They should tighten immediately to avid inflation reaching extreme or even hyper levels, even if that means the markets tumble. It is best to not prolong a guaranteed market fall because that can lead to a worse situation (EX: The U.S. economy, we have an enormous liquidity and solvency problem).
Indeed it is contradictory for the Phillippines to say that it can see 6 to 7 percent growth this year as if it continues, it can lead to hyperinflation. The country can collapse. With controlling inflation, it is possible to expect growth like that.
Hassan, I am surprised by the fact that the Philippines, a country classified as a developing economy has such a big growth. I am also curious that with the factors like an increase in employment, and spending, how big of a part tourism plays in the growth of the economy. I am also surprised by the fact that the country has a 6.5% growth rate with record-high inflation for the last 14 years. I am concerned about how are the Philippines expecting to maintain the growth to 6 to 7% Without the fear of inflation. To tackle inflation they have to increase the interest rates which will most likely slow down the economy.
Personally, I feel that the new populist government should focus more on the 14-year high inflation rates, instead of aiming to pursue 6-7% GPD growth in 2023, as maintaining a development rate this high is diametrically opposed to the need to reduce the inflation rates.
I hold a firm belief that governments should enact deflationary monetary policies in the event of high inflation rates, instead of pursuing high growth rates, as economic stability is highly important. Continuing on a path of high growth at the expense of inflation would lead to a vicious cycle where consumers save very little, as the real value of their money declines rapidly, causing even more inflation, which may lead to hyperinflation.
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