Philippine Economic Updates

Vol. 3-2023, August 2023

Economy sustains expansion driven by services as employment conditions and tourism-related spending improve
• GDP expanded by 4.3% in Q2 2023 with major supply-side sectors, agriculture, industry, and services growing at 0.2%, 2.1%,
and 6.0%, respectively. Household expenditure, gross fixed capital formation and net exports grew 5.5%, 3.9% and 3.7%,
respectively, on the demand side. Tourism-related spending and commercial investments drove economic expansion for the
quarter.
• H1 2023 GDP grew by 5.3%, anchored on historic high employment levels, acceleration of tourism, and increasing investment
registration activities.
• The government implements catch-up plans and expedites programs and projects for the rest of the year to achieve the
growth target of 6.0% to 7.0% for 2023.
R&I’s positive outlook signals likelihood of a rating upgrade in the near term
• Japanese credit rating agency, Rating and Investment Information Inc. (R&I), affirmed the Philippines’ investment grade
rating of ‘BBB+’ and revised its outlook to ‘Positive’ from ‘Stable,’ citing the country’s robust macroeconomic fundamentals,
improving fiscal position, sound banking system, comfortable external payments position, and stable political environment.
• The revision indicates R&I’s views on the medium-term prospects of the country, stating that it “will upgrade the rating once
the factors, such as the economic growth path sought under the Philippine Development Plan 2023-2028, the stable
macroeconomic condition, and the improving trend of fiscal consolidation are confirmed.”
Monetary Board maintains policy settings amid easing inflation
• Inflation further decelerated to 4.7% in July from 5.4% in June. The latest inflation readings support the BSP’s assessment that
inflation will return to within target range of 2.0% to 4.0% by Q4 2023, despite a generally higher path, reflecting the impact
of higher international oil prices.
• The balance of risks to the inflation outlook continues to lean toward the upside, due to potential price pressures linked to
the impact of possible higher transport chargers; higher minimum wage adjustments; persistent supply constraints on key
food items; and effects of El Niño on food prices and power rates. Given these considerations, the Monetary Board deemed it
appropriate to maintain monetary policy settings to allow a moderation of inflation even as authorities continue to assess the
emerging risks to the inflation outlook. The BSP remains prepared to respond as necessary to safeguard the inflation target, in
keeping with its primary mandate to ensure price stability.
Philippines’ Credit Ratings R&I’s Analytical Pillars and Rating Commentary
As of 7 August 2023 7 August 2023

Fitch
Affirmed at BBB/ Stable – May 2023 Economic Fundamentals Fiscal Conditions
“The Philippine economy has been “R&I believes that the fiscal deficit will likely improve to a
Affirmed at A-/Stable – Mar 2023 performing well despite uncertainty level in line with government target, due partly to the
JCR
surrounding the global economy.” solid trend of tax revenue.”
Affirmed at BBB+/Stable – Nov 2022
S&P Policy Management Socio-Political Fundamentals

Affirmed at Baa2/Stable – Sep 2022 “In terms of economic policies, the Marcos Jr. administration has “The high approval rating of
Moody’s continued the previous administration's policies to address key President Ferdinand Romualdez
infrastructure development and structural reforms, leading to Marcos Jr. contributes to
Affirmed at BBB+/Positive – Aug better prospects that the country will make progress in raising maintaining a stable political
R&I
2023 income levels, which has been a key challenge.” environment.”

Commitment toward a sustained rapid, solid, and inclusive economy

Stronger growth rebound anchored on sound Philippines remains among the fastest growing economies
fundamentals in Southeast Asia
Real GDP Growth (yoy, %) 18.0 Real GDP Growth (yoy, %)
14.0
13.0 8.0
10.0 5.6
10.0 6.4 7.1 7.0
6.4 4.3 6.0 5.2
7.0 4.3
4.0 2.0 4.1
1.0 (2.0) 2.7
(2.0) 0.7
(6.0)
(5.0)
(8.0) (10.0)
(11.0) (14.0)
(14.0) (18.0)
(17.0)
Q3-20

Q4-20

Q3-21

Q4-21

Q3-22

Q4-22
Q2-21
Q1-20

Q2-20

Q1-21

Q1-22

Q2-22

Q1-23

Q2-23
Q3-17
Q4-17

Q3-18
Q4-18

Q3-19
Q4-19

Q4-22
Q3-20
Q4-20

Q3-21
Q4-21

Q3-22

2023F*
2024F*
Q1-17

Q1-18

Q2-23
Q2-17

Q2-18

Q1-19
Q2-19

Q1-20
Q2-20

Q1-21
Q2-21

Q1-22
Q2-22

Q1-23

Philippines Malaysia Indonesia

Thailand Singapore Vietnam

Maintain policy settings amid easing inflation, while assessing emerging risks1/

Headline CPI (yoy, %), 2018 = 100 7.0 Policy Rates (%)
6.25
10.0 6.5 5.75
6.0
9.0 5.5
8.0 5.0
7.0 4.5
6.0 4.0 3.50 3.55
6.7 3.5 3.00 3.00
5.0
4.0 4.7 3.0 2.50
2.5 2.00
3.0 2.00
2.0 1.75
2.0 1.5
1.0 1.0 0.50
0.0 0.5 0.10
0.0
PH ID SG VN MY TH

Seasonally-Adjusted MoM Inflation Headline Inflation Core Inflation Covid Low Latest Policy Rate

1/ Since May 2022, the BSP has increased its policy rate by 425 bps.

*High end of GDP growth target for 2023 and 2024.

Source: NEDA, DBM, PSA, Bloomberg, BSP, CEIC, and other Central Bank Websites
 Remittances are a strong source of growth and Ample reserves support solid external position
stability for the Peso Gross International Reserves (US$ bn); Import Cover (months)
35.0 OFs’ Cash Remittances (US$ bn) 16
100.0 108.8
30.0 14
32.5 99.7
31.4 96.1
25.0 80.0 12
26.9
80.7 10
20.0
60.0
9.7 8
15.0 8.8
15.8
15.3 40.0 7.4 6
10.0 7.2
4
5.0 20.0
2
0.0
2016 2017 2018 2019 2020 2021 2022 Jan-Jun Jan-Jun 0.0 0
22 23 2016 2017 2018 2019 2020 2021 2022 Jul-23
Gross International Reserves, US$ bn (LHS)
Import Cover, Months (RHS)

Strong loan expansion led by household consumption Improving loan demand on better paying capacity
U/KBs Outstanding Loans (PHP tn) and Non-Performing Loans
May 2023
Share to Total
Growth
(NPL) Ratio (%)
Sectors (Net of 14.0 4.0
(PHP bn) (%)
RRPs,%)
Loans to Productive Sector 9497.8 87.0 7.9 11.7 3.5
12.0
Real Estate Activities 2191.0 20.1 5.5
3.2
Wholesale and Retail Trade, Repair of Motor 3.0
Vehicles, Motorcycles 1229.7 11.3 8.6 10.0
2.9
Manufacturing 1150.8 10.5 0.6 2.5
Electricity, Gas, Steam and Air-Conditioning 8.0
Supply 1210.2 11.1 14.1
2.0
Financial and Insurance Activities 996.0 9.1 7.3
6.0
Construction 423.5 3.9 5.8 1.5
Information and Communication 602.6 5.5 15.9
4.0
Transportation and Storage 359.8 3.3 7.5 1.0
2.8
Agriculture, Forestry, and Fishing 202.1 1.9 3.7
2.0 0.5
Others 1131.9 10.4 4.1
Loans to Household Consumption 1092.9 10.0 24.3
Loans to Residents (Res), net of RRP 0.0 0.0
Agreements 10590.7 97.1 10.1
Loans to Non-Residents (Non-Res) 320.9 2.9 12.7
Total Loans to Res and Non-Res, net of RRP 10911.5 100.0 10.2
Total Outstanding Loans (LHS) NPL, Gross ratio (RHS)

Efficient mobilization and utilization of resources to help Debt structure remains resilient; on track with fiscal
achieve fiscal sustainability consolidation goal
National Government (NG) Expenditure, Revenue, and Deficit (PHP tn) National Government Outstanding Debt (% share)

10.0 10

8.0 100.0%
8

6.0 5.2 90.0%

6
3..8 3.5 31.4 31.7
4.0 3.1 80.0%
4
2.4
2.0 1.9 70.0%
2 78.1
60.0%
0.0 0
50.0% 19.2
(2.0) (0.7) (0.6) -2
(1.6) 40.0%
(4.0) (3.4) -4
(4.8) 68.6 68.3
30.0%
(6.0) -6
20.0% 41.8
(7.3)
(8.0) -8
18.4
10.0%
(10.0) -10
0.0% 3.5
2019 2020 2021 2022 Jan-Jun 23
Jun-23 Jun-23 Jun-23 Jun-23
Total Revenues Total Expenditures By Maturity
By Source By Currency Debt-to-GDP
Fiscal Balance Deficit-to-GDP (%)
Note: Deficit-to-GDP is as of Q2 2023 Long-term
Figures may not add up due to rounding Domestic/Local External/Foreign Medium-term

Short-term

Contact Information

For further information about the Investor Relations Group or the Philippine economy, please contact: ThinkGrowthThinkPhilippines
Investor Relations Group
Bangko Sentral ng Pilipinas #ThinkGrowthPH
A. Mabini St. cor. P. Ocampo St. Malate Manila, Philippines 1004
Tel: (632) 8708-7487 / (632) 5303-1581
Email: iro-semu@bsp.gov.ph
Webpage: https://www.bsp.gov.ph/Pages/IRO.aspx InfoIROatBSP

Disclaimer: If you are not the intended recipient, any unauthorized disclosure, copying, dissemination or use of any of the information is strictly prohibited. This contains
data sourced from various Philippine government, multilateral/bilateral, and private sector websites/reports as of 10 August 2023, unless otherwise indicated. These sources
have been cited where possible.