Philippine Markets Newsletter

PH Monday Macro: Philippine economy shrugs off recession concerns

February 13, 2023

From food shortages making Filipino household dishes recipes incomplete to high gas prices at the pump, it caused profound pessimism among Philippine consumers. However, GDP, the most common indicator of the overall economic health of the country, rose in the last quarter of 2022. 

The question everyone wants to know: “Why?”. Today, we look at the contributing factors as to why the country still managed to grow despite so many worries revolving around the economy. 

Philippine Markets Daily: 
The Monday Macro Report
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There are ubiquitous concerns about the economic state of the Philippines. Rising inflation and deteriorating consumer confidence have caused profound pessimism among individuals. 

Yet, the Philippine economy in 2022 was strong and still managed to grow 7.2% in Q4 last year. This makes the annual GDP growth rate rise from 5.7% in 2021 to 7.6% in 2022, a record-breaking 45-year high.

A significant contributor to the upturn was the ascent in the year’s first half, led by the transportation and storage sector. When nations worldwide gradually eased travel restrictions and airlines were selling promos and cheap airfare, people started to finally travel locally and internationally. This spike was one of the reasons for the quarterly escalation.  

Other factors in the hike were construction and manufacturing. Although these industries are widely talked about because these are what usually drive progress in a developing country like the Philippines, we want to discuss sectors that have equivalent merit but are not commonly recognized. 

These are the financial and insurance activities and wholesale and retail trade (including the Repair of Motor Vehicles and Motorcycles) industries. In Q4 2022, both industries accounted for 9.8% and 8.7% of the total quarterly growth, respectively, and were also leading sectors to the Q3 growth. 

In the financial and insurance industry, “other financial services” contribute more than two-thirds of the financial activities. This umbrella may include loans, factoring, derivatives, and more. Each of these services is commonly looked at to weigh the risk tolerance of individuals and consumers.

With this industry expanding, it could tell us that the intestinal fortitude of borrowers and investors are increasing. This case is evident with consumer loans advancing, which we covered previously.

The wholesale and retail trade sector consists of 19 industry groups. This industry is primarily based on all types of goods that are sold. Specifically, goods that are bought by consumers from both wholesale and retail merchants. 

Generally, goods sold are rising, implying that the Philippine consumer’s appetite is growing. If the condition of the consumers remains robust, this will continue the upward trend of the country’s expansion because household consumption contributes roughly 75% to the total GDP. 

The Philippines ended another positive year with no negative quarters. However, we need to monitor the impact of China’s reopening on our economy as it is the Philippine’s largest trading partner in both importing and exporting. 

As China’s economy reopens, pent-up demand and economic activity will start to surge, likely boosting global economies’ global output. As for the Philippines, this could mean higher exports to the world’s second largest economy, potentially bringing Philippine GDP higher. 

With inflation hitting 8.7% in January, looming recession worries in other countries, and existing commodities bottlenecks, only time can tell if this upward trend is an economic lag or if everything is already baked in.

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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