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MANILA – The investment banking arm of the Metrobank Group expects the Philippine economy expanding by 6 percent in 2023 which continued to be fueled by strong domestic demand amid further economic reopening.

In a virtual briefing on Wednesday, First Metro Investment Corporation (FMIC) president Jose Patricio Dumlao said the country’s macroeconomic fundamentals remain strong given anticipated external headwinds –slower global growth, interest rates and inflation will remain elevated and volatility will persist– which will temper growth.

Dumlao said robust domestic demand boosted the economy which grew 7.7 percent in the first nine months of 2022 amidst the unexpected challenges in the global economy.

Economist Victor Abola from the University of Asia and the Pacific said the services sector will drive this year’s gross domestic product (GDP) growth.

Abola said economic growth is dependent on consumption and investment in government spending.

“On the investment side, there is going to be a strong recovery of infrastructure spending,” he said, identifying infrastructure as an “important ingredient” of growth.

The FMIC expects the reopening of the economy, removal of restrictions on people’s mobility and business operations to push household consumption, employment, services and government spending.

However, Abola identified food inflation as among the downside risks that can derail the economic recovery this year.

“Analysts are seeing (a) softening in oil prices. As we see, it’s having difficulty getting back to 80 dollars per barrel so I’m more concerned about possible persistence in food inflation in the local context,” he said.

The FMIC sees inflation will remain elevated at 4.5 percent as a result of higher oil prices globally affecting the local prices of food and commodities in the local market.

The country’s average inflation in 2022 reached 5.8 percent despite the faster pace in price increases in December.

The country’s headline inflation increased to 8.1 percent last month, the highest since November 2008. This has been attributed to an acceleration in prices of food and non-alcoholic beverages. (PNA)