Bernardo M. Villegas
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Short Term Forecasts for 2023

             Whatever happen in the global economy, the Philippine economy is resilient enough to continue growing at 6 to 7% for the entire of 2023.  In fact, there is a possibility that the GDP growth for the first quarter of 2023 could have surpassed 7%.  With a very experienced and competent Central Bank, inflation can be expected to slow down to 4 to 5 % by the end of the year.  Higher balance of payments deficit resulting from the slowing down of exports would lead to the weakening of the peso vs. the dollar, with year-end expected exchange rate to range between P55 to P56 to a U.S. dollar. 

            GDP growth rate will continue to be led by Personal Consumption Expenditure that can grow at 7% for the entire year.  The engine of growth for this sector will be the continuing increase at 3 to 5% of the remittances from the more than 10 million OFWs who are in increasing demand from the developed countries of North America and Europe as well as the countries in the Middle East, despite an expectation of a global recession.  In fact, as Ellon Musk keeps on insisting, the most serious world crisis is not a recession and much less a population explosion but the rapid aging of practically all the developed countries led by Japan and the Western European countries.  This became very visibly obvious to me in a recent trip to both Italy and Spain, two countries in European Union with the lowest fertility rates.  In a road show I participated in, there was an executive from one of our executive and manpower research firms.  The Europeans in the audiences were very vocal about their countries’ urgent need for the human resources of countries like the Philippines that are still enjoying a demographic dividend.          Mr.Cesar Averia, CEO of Editstaffbuilder, had to reassure them that the Philippines can continue to supply them with highly qualified nurses, caregivers, hospitality workers and IT specialists.

            In line with our having a young, growing and English-speaking population, another major source of purchasing power of the more than 110 million Filipino consumers is the eve resilient IT-BPM sector that is bringing in close to $34 billion this year and growing without fail at 5 to 8% annually.  This sector now employs 1.4 million well paid workers, most of them young, a number that can swell to more than 2 million by the end of the presidential term in 2028.  The industry association expects their earnings to reach $50 billion also by 2028.  Think of all the appliances, cars, condominium units and other consumer durables that these millennials and centennials can buy.  Add to the consumption binge the revenge traveling and tourism that is now very visible, mostly domestic tourism but increasingly foreign tourism especially to Japan and religious sites in Europe and Jerusalem.

            Construction will be a lead sector as the Government tries its level best to continue the Build, Build, Build program started by the last Administration.  Public works will shift from roads and bridges to more tollways, subways, railways and airports, a good number of them as PPP projects as well a foreign direct investments. FDIs will be crucial in maintaining the percentage of spending on infrastructures at the desired 5 to 6% of GDP because the Government will be hard up to use its own resources, being deeply buried in debt that was incurred during the pandemic period.  It is expected that the so-called Maharlika Investment Fund (which I have relabeled as the Philippine Long Term Investment Fund) will be one of the effective instruments to bring in large doses of FDIs especially in such strategic infrastructures as airports, railways, subways, renewable energy, telecoms and seaports.  In fact, an encouraging sign is that one of our non-traditional trading partners, Denmark, will be the source of a huge amount of FDI of $5 billion that will be invested in offshore wind projects, making it the first 100-percent foreign-owned offshore wind development.  In addition, the Danish Ambassador announced that Danish nuclear technology company Seaborg is keen on bringing its know-how in small modular reactors as part of the energy mix being considered by the Marcos Jr. Administration.  It is providential that the Supreme Court had decided that foreign companies can own 100 % of any renewable energy project.

            From the data of the last three to five years, above-average regional growth is expected in selected provinces outside of the National Capital Region.  Expects provinces like Cavite, Batangas, Laguna in the CALABARZON area to grow at 7 to 8 %.  Likewise above-average growth can be expected in some provinces in Central Luzon, such as Bulacan, Pampanga, Tarlac and Bataan.    In the South, Iloilo is expected to lead growth, stealing the thunder from Metro Cebu that is getting as congested as Metro Manila.  In Mindanao, Davao is the undisputed leader in growth as construction activities heat up, both in the public and private sectors.  Cagayan de Oro will not be far behind because of its being the undisputed gateway of Mindanao both to the world and to the rest of the Philippines.  Although agriculture as a whole will be the laggard, struggling to grow at 1 to 2 % for the whole year, Mindanao has the advantage of attaining economies of scale in farming because of the less fragmented state of its farms.  The number one key to attaining higher rates of growth in agriculture is the reconsolidation of the millions of hectares of farms that were fragmented during the unsuccessful agrarian reform period (which expired in 2014).  The Government is now focusing on efforts to reconsolidate these farms, especially in the coconut industry, through cooperatives and the nucleus estate system made popular by Malaysia in palm oil industry.  A very encouraging sign is that some non-agricultural conglomerates like the First Pacific group and the DMCI group are actually beginning to invest heavily in food production.

            Export-oriented manufacturing. such as electronic components and car parts will slow down as the global recession hits the developed world.   Manufacturing for the domestic market will, however, continue to grow, especially in the food and beverage, construction materials, and pharmaceutical sectors.  Services will outpace manufacturing, especially in the hospitality sector, logistics and transport and the digital industry.  The sales of high-priced real estate products will slow down but there will be continuing high demand, despite higher interest rates, for economic and low-cost housing as OFWs and workers in the BPO-IT industry will continue to have sufficient incomes to amortize units with prices ranging from P1 to P5 million per unit.  What could experience a major slowdown is the market for high-priced residential units, whether condominium or detached units.  The same will hold true for office space since there is an ongoing glut due to the phasing our of the POGO business and increasing tendency of BPO-IT workers to work from home.

            Because the sunrise industries, such as food, transport, logistics, hospitality and the digital industry are more open to small and medium-scale enterprises, we can expect faster growth in the MSME sector, especially among the so-called social enterprises that combine a social mission with making a profit.  This may be especially pronounced in the agricultural sector where small farmers are increasingly getting the help of social entrepreneurs in Fintech, digital marketing, cooperative formation and nucleus estate management.  We should do everything possible to get the urban and middle-income professionals to go out of their way to help small farmers and micro-entrepreneurs.  We should multiply the likes of such social enterprises as Mayani,, Lionheart Farms, Harbest, and others.  For comments, my email address is