**Rising Costs Slow Philippine GDP Growth: Moody's**

Tecfai Editorial Team

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Post on Nov 05, 2024

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Rising Costs Slow Philippine GDP Growth: Moody's

The Philippine economy is facing headwinds as rising costs continue to weigh on growth. Moody's Investors Service, a leading credit rating agency, has downgraded its forecast for the country's Gross Domestic Product (GDP) growth in 2023, citing the impact of inflation and higher interest rates.

Moody's Revised Forecast

Moody's now expects the Philippine economy to expand by 5.5% in 2023, down from its previous forecast of 6.0%. The agency also revised its 2024 growth forecast to 5.7% from 6.2%.

This downward revision reflects the challenging economic environment, characterized by:

• Elevated Inflation: The Philippines is grappling with persistent inflation, driven by soaring food and energy prices. This has eroded consumer purchasing power and hampered household spending.
• Higher Interest Rates: To combat inflation, the Bangko Sentral ng Pilipinas (BSP), the country's central bank, has implemented a series of interest rate hikes. While this helps curb inflation, it also increases borrowing costs for businesses, potentially slowing investment and economic activity.
• Global Economic Uncertainty: The global economic outlook remains clouded by various factors, including the war in Ukraine, lingering supply chain disruptions, and tightening monetary policy in major economies. This uncertainty adds to the challenges facing the Philippine economy.

Domestic Factors Contributing to Slowdown

In addition to external factors, several domestic developments are contributing to the slowdown in GDP growth:

• Weak Consumer Spending: Despite robust employment growth, rising prices have dampened consumer confidence, leading to a slowdown in consumer spending.
• Declining Investment: Businesses are becoming more cautious about investments due to elevated interest rates and economic uncertainty. This has slowed investment growth, further hindering economic expansion.

Government Measures to Boost Growth

The Philippine government is implementing various measures to support economic growth and mitigate the impact of rising costs:

• Targeted Cash Transfers: The government is providing financial assistance to vulnerable households through targeted cash transfer programs to alleviate the burden of inflation.
• Infrastructure Development: The government continues to invest in infrastructure projects to improve connectivity and boost economic activity.
• Fiscal Stimulus: The government is considering additional fiscal stimulus measures to support businesses and create jobs.

Outlook for Philippine Economy

While the Philippine economy faces significant challenges, the country's strong fundamentals, including its young and growing population and its vibrant services sector, provide a foundation for long-term growth.

However, the government needs to continue implementing sound economic policies and address structural issues to sustain growth and ensure inclusivity. This includes improving the business environment, investing in education and skills development, and promoting innovation and entrepreneurship.

The outlook for the Philippine economy will depend on the trajectory of inflation, interest rate policies, and global economic conditions. The government's ability to navigate these challenges and implement effective policy responses will be crucial in determining the pace and sustainability of economic growth.