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PH must increase investments if it is to meet its 6%–7% GDP goal by 2023.

According to Bank of the Philippine Islands (BPI) senior economist Emilio Neri Jr., luring additional investments will be essential for the nation to maintain its economic development and achieve a GDP target of 6 to 7 percent next year.

Neri claimed that, particularly since the start of the coronavirus disease 2019 (Covid-19) pandemic, the contribution of investments to GDP has lagged behind that of consumption, government spending, and export earnings.

“We will find it very difficult to meet the original objective of 6 to 7 (percent), and we may have to set them with something like 5 to 6 (percent), if there is no rapid improvement in investments, which is important for growth rates of approximately 7 percent for the Philippine economy. Therefore, increasing investments is essential, he said.

According to data from the Philippine Statistics Authority (PSA), approved investments in the year’s first three quarters totaled PHP449.58 billion, a 28% increase over PHP350.44 billion during the same period in 2021.

In contrast to the expected 7 percent increase for the entire year of 2022, the BPI predicted that the Philippine GDP would stabilize at 5.6 percent in 2023.

In 2024, it predicted that the Philippine GDP will expand by 5.8 percent.

However, Neri noted that securing additional investments will be more challenging given the rising interest rates.

He claimed that the Bangko Sentral ng Pilipinas (BSP) is anticipated to further execute tightening of monetary policy as the nation is anticipated to record high inflation rates next year.

Before executing rate decreases, the economist continued, the BSP policy rate may reach a top of 6% in the middle of 2023.

The anticipated lowering of policy rates is anticipated to take effect at the same time that the US Federal Reserve System lowers rates to combat the anticipated US recession.

According to the BPI, the BSP policy rate would ease to 4.75 percent in 2023 before stabilizing at 5.50 percent this year.

In 2020 and 2021, the policy rate of the central bank was set at 2%.

Continued headwinds

According to Neri, the country’s economic growth will be influenced externally by potential recessions in the US and the Eurozone, while inflation and the Covid-19 crisis will continue to be internal risks.

He also backed up the government’s earlier claim that despite rising inflation and a tightening of interest rates, a recession in the Philippines is improbable because of strong consumer demand.

The BPI expects inflation to be 5.8% this year and 4.88% in 2023, which is higher than the 2.48% inflation in 2020 and the 3.98% inflation in 2021.

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