THE Philip-pine eco-nomy is in for a slow start this year, especially with China recovering and increasing their demand for oil in 2023, according to local economists.
De La Salle University economist Maria Ella Oplas told BusinessMirror over the weekend that while the first quarter is usually the weakest period for the economy, it will be challenging this year.
China’s recovery is expected to drive up oil prices anew and make it difficult for net oil importers like the Philippines to prevent the higher costs from seeping into local inflation and pulling down GDP growth.
“It’s going to be a challenging slow start for us in terms of growth,” Oplas said. “I fear that with the reopening of China will come higher international oil prices which we cannot control because our demand is too small to affect the world market price.”
Oplas said the post-holiday period is usually greeted with low inflation and weak GDP growth because of the lack of demand in the economy.
But this time around, while demand dies down after a festive Christmas and New Year celebration, high inflation is expected to continue because of China’s recovery.
“Manufacturers (are) holding back on their production because of the rising cost of production plus people are really not buying,” Oplas added.
Ateneo de Manila University economist Leonardo Lanzona Jr. told this newspaper that the reopening of China will mean cheaper imports from the Philippines.
However, the gains from cheaper imports will only be offset by the higher oil prices. Lanzona said the overall impact of the reopening of China is “generally negative” for the Philippines.
He said apart from the impact of oil prices on local inflation, the reopening of China also means the chance of the Philippines to attract investments leaving Beijing.
“Without China’s full operations, there is a chance of reviving our manufacturing and trade sectors as other countries can probably shift their investments to us, instead of China,” Lanzona said.
“The Philippines needs to focus on its service sector and its adaptation of new technology in order to survive this,” he added.
On the upside, Managing Director of eManagement for Business and Marketing Services Jonathan Ravelas said China’s reopening would be good for ASEAN tourism, including in the Philippines.
Based on data from the Philippine Statistics Authority (PSA), inbound tourists from China account for 5.9 percent of total inbound visitors in the Philippines in 2020.
However, if more tourists from China will arrive in the country, Ravelas said this could also increase consumption thereby increasing demand and, subsequently, inflation.
“Tourism and consumption (will) benefit as a result (of) the reopening but could also fuel additional demand for oil keeping prices elevated. Thus keeping inflation quite elevated,” Ravelas said.
Based on the 2023 to 2028 Philippine Development Plan (PDP), the country’s GDP is expected to post a growth of 6 to 7 percent. This target has already been scaled down because of recession fears in many economies.
The administration also aims to keep headline and food inflation within 2.5 to 4.5 percent this year before reaching the 2 to 4 percent target starting in 2024.
In the January to November 2022 period, the average headline inflation was at 5.6 percent while food inflation was at 5.7 percent for all households.