Philippine Markets Newsletter

PH Monday Macro: 2023 in Four Charts

January 7, 2024

Happy New Year!

This year is a year to look forward to as the impacts of last year’s significant economic and global events begin to unfold in the economy. Additionally, we will find out whether the talk of an economic slowdown in 2024 will turn into reality.

Before exploring what the future holds in 2024, let’s take a moment to revisit the key macroeconomic events that will undeniably shape the trajectory of the economy this year.

Philippine Markets Newsletter:
The Monday Macro Report
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Last year, we observed several impactful economic events, the delayed effects of which will become apparent in the system this year. The focus of 2023 centered around two primary drivers that significantly influenced the Philippine economy and markets: Inflation and Interest Rates.

These two variables, which share an inverse relationship, were influenced by a myriad of economic factors, including money supply, sensitive demand, the global surge in commodity pricesbusiness expectationsconsumer behavior, and more.

In January, the inflation rate surged to a high of 8.7%. This raised concerns as the general prices of goods and services increased, theoretically leading to reduced economic activity. However, by November, inflation had eased to 4.1%, approaching the BSP’s target rate of 2%-4%.

The alleviation of month-to-month inflation following January’s peak prompted the BSP to shift its interest rate policy from a hawkish stance to a neutral position. Consequently, the central bank maintained the interest rate unchanged in the middle of the year.

The decline in inflation persisted throughout the year; however, second-round effects were expanding.

By October, in response to additional factors such as a weaker-than-expected global recovery, the anticipation of El Nino effects, domestic indicators indicating a fading short-term pent-up demand, and the rise in some commodity prices, the monetary board opted for off-cycle action and raised rates even further.

Speaking of commodity prices, one particularly contentious item experiencing a dramatic price increase was rice, prompting the imposition of a price ceiling.

Several factors contributed to the abrupt increase in the price of rice. The catalysts for this surge included adverse weather conditions that led to crop destruction and the illicit hoarding of the commodity.

Despite these influences on monetary policy, both leading and lagging indicators suggested that the Philippines exhibited no signs of a potential economic contraction. Philippine exports experienced growth following China’s reopening, unemployment remained steady around the 4% mark but fluctuated due to seasonal hiring cycles in certain sectors, and businesses demonstrated asset growth.

On the credit front, banks increased the availability of credit, and consumers expressed heightened confidence in their financial well-being. The overall growth rate of consumer loans was maintaining a consistently positive quarter-to-quarter change, with an annual growth rate of 16% for Q3 2023.

Finally, a noteworthy development: the Philippines had recently established its inaugural sovereign fund, known as the Maharlika Fund. This fund is designed to facilitate a seamless flow of capital and to channel these funds into socially impactful projects with the aim of fostering growth throughout the entire economy.

Economic drivers, such as inflation, interest rates, consumer behavior, and the global rise in prices of different commodities, require time for changes in these factors to materialize within the system. This is why the eventful year of 2023 had left investors speculating about how the economy will perform, considering the dynamic interconnections within the entire economic landscape.

In the coming week, we will delve into what to anticipate for 2024.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful..

Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Newsletter
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