In President Ferdinand Romualdez Marcos’ State of the Nation Address (SONA) on July 24, 2023, he asserted (to enthusiastic applause) that: “While the global prospects were bleak, our economy posted a 7.6% growth in 2022 – our highest growth rate in 46 years. For the first quarter of this year, our growth has registered at 6.4%. It remains within our target of 6% to 7% for 2023. We are still considered to be among the fastest-growing economies in the Asian region and in the world. It is a testament to our strong macroeconomic fundamentals.”
Data from the Philippine Statistics Authority (PSA) published May 11, 2023 do show a 1st Quarter 2023 growth rate in the Gross Domestic Product (GDP) of 6.4% (i.e. compared to 1st Quarter of 2022). Historical data showed that the country had positive growth rates up until the fourth quarter of 2019. The COVID-19 pandemic caused an economic downturn with negative GDP growth rates from the 1st Quarter of 2020 until the 1st Quarter of 2021. The country started to recover by the 2nd Quarter of 2021, with each quarter posting a growth rate above 7% up until the last quarter of 2022. It should be noted that the GDP growth rates shown in the chart below (c/o PSA) is based on 2018 constant prices, i.e. the GDP used is the real GDP or inflation corrected GDP. When using GDP based on current prices, the 2023 1st quarter growth rate was higher at 13.7%. The president also noted that the GDP growth rate is within the government’s target of between 6 and 7%.
Calculating the growth rates of GDP is very useful in terms of trends and forecasts. One might ask if the current GDP has already surpassed pre-pandemic levels. The table below shows the Philippines annual real GDP, based on 2018 prices as published by the PSA. The COVID-19 pandemic caused the real GDP to decrease in 2020, from PHP 19.37 Trillion down to PHP 17.54 Trillion. While the GDP started to recover in 2021, at PHP 18.54 Trillion it was still below the 2019 level. However, by 2022, the annual GDP had increased to PHP 19.94 Trillion, the highest GDP in the Philippines to date, and higher than the 2019 figure by 3%. In other words, the economy has already recovered from the effects of the pandemic and is now on pace for new highs. At current prices, the 2022 GDP is equivalent to PHP 22.02 Trillion.
The 2022 GDP can be broken down as follows: 8.9% from Agriculture, Forestry and Fishing, 29.7% from Industry, and 61.4% from Services. Comparing real GDP from 2021 to 2022, the Services sector had the biggest increase of 9.2%, while Industry increased by 6.5%. On the other hand, Agriculture had only a 0.5% increase. Within the Services sector, Accommodation and Food Services Activities had the largest increase at 32% compared to 2022, as restaurants and hotels recovered from the COVID-19 pandemic. This was followed by Other Services with a 28% increase, and Transportation and Storage with a 24% increase. Within the Industry Sector, Construction increased by 12%.
President Marcos also mentioned that “In 2022, the digital economy contributed 2 Trillion Pesos, the equivalent of 9.4% of our GDP.” This was also based on data released by the PSA on April 25, 2023. In its bulletin, PSA showed that the digital economy, composed of digital transactions covering Digital-enabling infrastructure, Ecommerce, and Digital media/content, grew by 11% from PHP 1.87 Trillion in 2021. The digital economy employed 6.05 million people in 2022.
In summary, President Ferdinand Romualdez Marcos statement about the economy during the 2023 SONA or State of the Nation Address was purely based on fact. If he had more time, the President, could have highlighted that the Philippine economy is the best it has ever been, has recovered completely from the negative effects of the pandemic, and is projected by the World Bank to exceed PHP 24 Trillion in 2023. If the country continues to reach these targets, the State of the Nation would continue to be sound, at least with respect to the Philippine economy.
Dr. Guido David is the Chief Data Scientist of Capstone-Intel Corporation.
Capstone-Intel is a high impact research company which uses innovative research technologies, tools and methods to convert data and information into breakthrough insights and actionable intelligence outputs. It is committed to help its clients solve problems, find solutions, grow markets and constituencies, build reputation, navigate risks, and manage crises; and to be the country’s leading private intelligence agency.
This story: Reaction to the 2023 State of the Nation Address: on the GDP Growth Rate was originally published on Capstone-Intel Corp.
