THE PHILIPPINES is expected to post gross domestic product (GDP) growth of 4.3% in 2023 the face of a widening current account deficit and still-elevated inflation, Nomura Global Markets Research said.

Nomura Global was upgrading a previous estimate issued in August of 3.6%, though the projection still suggests the Philippines will fail to meet its official GDP estimate of 6-7% by a wide margin.

In a research note issued by analysts Euben Paracuelles, Charnon Boonnuch, and Rangga Cipta on Wednesday, Nomura Global said: “Amid a global growth downturn, we do not see domestic demand being as resilient as in the past, and hence overall economic performance is likely to weaken significantly, particularly in the first half of 2023.”

Nomura Global expects the current account deficit to hit the equivalent of 6.3% of GDP this year and remain high at 4.4% in 2023.

It also forecasts exports to contract next year due to a sharp global slowdown with recessions expected in Europe and the US.

Rising prices of food imports will also continue to have a significant impact next year, it said.

“We believe the emergence of protectionist measures, with a growing list of countries implementing food export bans, will still disproportionately affect large food importers such as the Philippines. With still no end in sight on the conflict in Ukraine, we continue to assume prices of fertilizer and feedstock will remain high, boosting imports further,” Nomura Global said.

The current account deficit was at $7.9 billion in the second quarter, higher than the year-earlier $1.3-billion deficit, as the trade in goods deficit widened.

In the first half, the current account deficit blew out to $12 billion from $1.3 billion a year earlier.

The Bangko Sentral ng Pilipinas (BSP) expects a current account deficit of $20.6 billion — equivalent to 5% of GDP — this year.

“Importantly, we expect private consumption growth to ease to 5% from 8.1%, as pent-up demand fades and rising inflation hurts household purchasing power,” Nomura Global said.

Amid soaring prices of oil and food imports, headline inflation is expected to remain above the BSP’s 2-4% target in 2023. Nomura Global sees inflation to average 5.8% in 2022 and 4.2% next year.

Moreover, second-round effects will still be evident in the first half of 2023, with Nomura Global citing the transport fare adjustments made in October. Petitions for higher wages from workers are also increasing.

“As a result, we expect core inflation to remain elevated at around 5.9% year on year in (the first half of) 2023, before easing to around 3.1% in (the second half),” Nomura Global said.

Inflation of 8% last month was the highest in 14 years, or since the 9.1% posted in November 2008, the Philippine Statistics Authority said on Tuesday. — Keisha B. Ta-asan