March 19, 2023 | 5:12 pm
Introspective By Romeo L. Bernardo
I am pleased to share with readers the summary
of our March 3 quarterly forecast report for Globalsource Partners subscribers,
mostly global asset managers and banks. Globalsource Partners (globalsourcepartners.com) is a New York-based network of independent
analysts doing macroeconomic and political risk analyses of emerging markets.
Christine Tang and I are their Philippine advisors.
Much like the last Year of the Rabbit 12 years ago,
we enter 2023 as if going down a rabbit hole, not quite sure if surprises ahead
will be the pleasant or biting sort. As in 2011, 2023 follows a year of
stunning above 7% GDP growth and like before, the question we are struggling to
answer now is whether momentum can be sustained and how strongly. The year 2011
turned out worse than expected with only a 3.9% GDP growth rate due mainly to
the then new administration’s political choices that the current government is
set to avoid.
Fast forward to today, early gauges of domestic
economic activity — e.g., PMI, car sales — suggest that there is momentum going
into 2023 as memories of the pandemic fade. The global outlook has also become
less gloomy with advanced economies showing resilience and China reopening
after exiting its zero-COVID policy. The latter bodes well for Asian economies
like the Philippines eyeing a rebound in tourism.
On the other hand, most of the factors underpinning
our sober outlook last quarter still hold. Externally, world economic growth is
still expected to weaken following the series of jumbo rate hikes last year and
downside risks still dominate. Locally, high inflation has persisted, monetary
policy is expected to remain contractionary, and fiscal policy, on a
consolidation path. Although the economy still has remittances and BPOs
(including gig workers) to fall back on, the large windfall from last year’s
dollar rally has disappeared.
Weighing these against the new developments, we
have decided to bump up our 2023 growth forecast by 0.5% to 5.5% on the
strength of lingering catch-up demand and inbound tourism. This upgrade is
still below government’s 6% low-end target and assumes that it keeps to its
promise of spending the equivalent of 5% of GDP on infrastructure. The forecast
comes with major downside risks. Locally, most notable are, a.) continued
lapses in the management of food supplies that have contributed to skyrocketing
prices of basic goods, and, b.) the President’s upcoming choice for BSP (Bangko
Sentral ng Pilipinas) governor, critical for preserving similar confidence that
markets have on the incumbent, as well as possible mid-year changes in the cabinet.
The external outlook also faces risks from more turbulence in financial
markets, elevated and volatile commodity prices, trade disruption due to
heightened US-China tensions, and a resurgence in COVID cases.
On the upside, the Senate’s recent ratification of
the Regional Comprehensive Economic Partnership (RCEP) as well as closer
security ties with the US could see the beginnings of friend-shoring
investments trickling in.
Romeo L. Bernardo is a co-founder, trustee/director
of the Foundation for Economic Freedom. He serves as a board director in
leading companies in banking and financial services, telecommunication, energy,
food and beverage, education, real estate and other. He has had a 20-year run
in the public sector including stints in the Department of Finance
(Undersecretary), IMF, World Bank and the ADB
