External Pressure Remains a Challenge for PH Economic Growth

The Philippine economy continues to face domestic challenges and  global uncertainties that require careful fiscal management and policy adjustments.

Factors like geopolitical tensions, disrupted supply chains, and volatile global financial conditions make economic planning more complex.

These pressing economic issues were the focus of a recent webinar by the Philippine Institute for Development Studies (PIDS).

Experts examined how external shocks influence domestic economic stability and explored potential policy solutions.

With consumer activity playing a key role in economic recovery, the importance of balancing short-term interventions with long-term structural reforms was underscored.

PIDS Senior Research Fellow Dr. John Paulo Rivera stated that the Philippine economy posted a moderate gross domestic product (GDP) growth for the last quarter of the year, which lagged behind some of its ASEAN neighbors. This was primarily due to ongoing inflationary pressures, elevated borrowing costs, and subdued external demand.

“While the Philippines’ growth was still higher than Thailand and Malaysia, global demand uncertainties weighed more heavily for the country,” Rivera said.

He stressed that achieving sustained economic expansion requires policy coordination at both the national and international levels, particularly in trade and investment policies.

Rivera also explored how government spending impacts economic performance given effects on domestic demand and inflation. This, in turn, can prompt monetary tightening by the Bangko Sentral ng Pilipinas (BSP) to prevent “overheating”, where rapid economic growth leads to excessive demand and rising prices.

Rivera highlighted how the BSP carefully adjusts policy rates to balance inflation control with growth, taking into account global economic trends.

In a separate presentation, former PIDS Supervising Research Specialist John Paul Corpus highlighted the role of macroeconomic models in understanding external pressures.

He articulated that economic modeling enables policymakers to anticipate fluctuations in oil prices, exchange rates, and government spending, allowing them to evaluate policy responses and their potential effects on economic recovery.

Adding to the discussion, Security Bank Chief Economist Angelo Taningco expressed concerns about global trade disruptions. “Many leaders around the world are very much cognizant of a looming escalation on tariffs and a potential date for that tariff retaliation,” Taningco explained.

He noted how a potential global trade war could affect business operations by driving up import costs, making production more expensive for local businesses and, ultimately, increasing retail prices for consumers.

Taningco also warned about the broader macroeconomic effects of trade wars, noting that the Philippines, as a net importer, is particularly vulnerable to rising import costs, which could affect local businesses and consumers alike.

Meanwhile, SM Investments Economist Robert Dan Roces offered a broader perspective, emphasizing that economic data reflects the experiences of over 100 million Filipinos dealing with current global and local economic challenges. “There is a bigger picture here that deserves attention. Think about it: we are still outpacing many of our neighbors while facing the same global challenges,” Roces noted.

He emphasized that economic growth should be inclusive. “GDP numbers are like a social media profile as they do not really tell the whole story. The real question is not just how fast we are growing, but who is benefiting from this growth?” he posited. “Are we building an economy that lifts all boats, or just a select few?”

Roces also pointed to the role of digital transformation in economic resilience, emphasizing that it should serve as one of the foundations for all sectors rather than being limited to a single area of the economy.