PHL unlikely to fall into a recession, Marcos says

Families enjoy taking pictures around Luneta Park in Manila, Nov. 28. Economic managers are targeting 6.5-7.5% gross domestic product growth this year, and 6-7% in 2023. — PHILIPPINE STAR/ MIGUEL DE GUZMAN

A RECESSION is unlikely in the Philippines, according to President Ferdinand R. Marcos, Jr., citing the improvement in jobs market in October.

“I’m confident that recession will not happen in the Philippines because the unemployment rate is very low and if you remember, this administration has been prioritizing the creation of jobs since the beginning,” Mr. Marcos said in mixed English and Filipino in a video message sent to reporters.

The Philippines’ jobless rate dropped to 4.5% in October, lower than the 5% in September and 7.4% a year earlier. This represented 2.241 unemployed Filipinos in October, lower than the 2.497 million in September.

The economy expanded by 7.6% in the third quarter, slightly faster than the revised 7.5% growth in the second quarter and 7% a year earlier. Economic managers are targeting 6.5-7.5% gross domestic product (GDP) growth this year, and 6-7% in 2023.

A technical recession is marked by two consecutive quarters of declining GDP.

The Philippines fell into a recession during the height of the coronavirus pandemic. It recorded five straight quarters of GDP decline from the first quarter of 2020 to the second quarter of 2021, as strict lockdowns hurt economic activity.

At the same time, Finance Secretary Benjamin E. Diokno said recent economic data would indicate a “sustained, strong fourth-quarter economic performance.”

“The jobs market continues to improve, with unemployment rate down to its lowest level in 17 years, manufacturing output is rising and capacity utilization rate is improving, the peso has stabilized and is growing stronger, and oil prices are falling to near pre-Russian invasion of Ukraine levels,” Mr. Diokno said in a Viber message to reporters on Thursday.

For the first 10 months of the year, the unemployment rate averaged 5.6%, lower compared with the 7.8% average in 2021.

Mr. Diokno also cited the improving underemployment rate and factory data.

The October underemployment rate eased to 14.2%, while factory output rose for a fifth straight month in October.

“The manufacturing sector posted its highest average capacity utilization rate for the year at 72.4% in October. The manufacturing sector is recovering well,” Mr. Diokno said.

The Finance chief said that inflation is expected to slow down as early as the first quarter of 2023.

“With strong (fourth-quarter) growth, the implication is that with the peso stabilizing and oil prices falling, inflation, which is the top concern of the present administration, will soon fall,” Mr. Diokno said.

Headline inflation accelerated 8% in November, the fastest since the 9.1% during the Global Financial Crisis in November 2008. In the 11-month period, inflation averaged 5.6%, faster than the 4% in the same period a year ago, but still below the BSP’s full-year forecast of 5.8%.

The peso closed at P55.45 against the dollar on Wednesday, strengthening by 52.5 centavos from P55.975-a-dollar close on Tuesday.

“With the recent numbers, the likelihood that the BSP forecast, which was subsequently adopted by the Development Budget Coordination Committee (DBCC), will be achieved is getting stronger,” he added.

The DBCC on Monday raised the average inflation assumption to 5.8% for 2022 from 4.5-5.5% previously. It also expects inflation to ease to 2.5-4.5% in 2023, and return to the 2-4% target in 2024 to 2028.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the low unemployment rate suggests low odds of a recession.

“The government should still remain vigilant of headwinds and risk factors that like the 14-year high inflation rate and global factors like continued lockdowns in China that would lead to a slowdown in economic recovery/growth,” he said in a Viber message. 

John Paolo R. Rivera, an economist at the Asian Institute of Management, said a drop in unemployment is not the only indicator of incidence of recession.

“Other macroeconomic indications like inflation and the exchange rate should be taken into consideration,” he said in a Viber message. — John Victor D. Ordonez and Luisa Maria Jacinta C. Jocson

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