Finance Secretary Benjamin E. Diokno expects the worst is over for the Philippines with the economy growing even amid a likely recession for the global economy.

The Experts

Leaving behind a tough 2022, on to a fresh start

Global stocks had a rough year with 2022 proving to be one of the worst years for markets in recent memory.

FWD Investment Team

Global and Philippine Market Update

Dec. 31, 2022


Global Markets  

Global Stocks had a rough year with 2022 proving to be one of the worst years for markets in recent memory.

  • Investors were expecting gains in the markets to slowdown but were caught unprepared for the retreat that happened. Inflation was supposed to be “transitory” but turned “sticky.” This led the Federal Reserve (Fed) and other global central banks to raise rates at an aggressive pace. The war in Ukraine and subsequent shock in the energy markets caused high volatility and a gloomy economic outlook. The likelihood of a recession seems to increase as time passes. However, the new year brings investors new hope that a new rally will kick off with inflation subsiding and growth returning as a top priority.
  • The new year is expected to see the markets’ return to post some gains. Economists predict that the Fed will slow down its rate hikes and inflation will drop from its peak in 2022. While the global outlook remains problematic and recession risks remain, asset prices should begin recovering once central banks cease their monetary tightening.
  • Economic activity is rebounding in several Chinese cities where COVID infections likely peaked. Mobility remains below pre-pandemic levels but the quick rebound in activity in cities like Beijing suggests that the economy could recover faster than expected once the COVID wave passes. December may likely end up being the bottom of the Chinese economy and the new year bringing in renewed growth. 


Philippine Stocks  

Philippine Stocks ended the year in negative territory. The economy made some positive strides as it moves beyond the pandemic but was eventually weighed down by negative headwinds from abroad.

  • Market participants were optimistic at the start of 2022 with the reopening story gaining momentum. However, this bubble burst as inflation, rate hikes and recession fears grabbed headlines. The growth of the Philippine economy was not enough to offset the risk-off sentiment that prevailed throughout the year.
  • The Philippines is expected to be one of the fastest growing economies among members of the Association of Southeast Asian Nations (ASEAN). Finance Secretary Benjamin E. Diokno expects the worst is over for the Philippines with the economy growing even amid a likely recession for the global economy. Mr. Diokno believes that the adoption of the first-ever Medium-Term Fiscal Framework and the Philippine Development Plan (PDP) will help accelerate the economic recovery. One-fifth of the national budget includes public construction which should start to run on the first day of the new year. 
  • The optimistic outlook on the Philippine economy is helped by a strong credit profile. Major credit agencies kept the Philippine’s investment grade credit rating. This provides the country access to relatively cheap credit. The country also benefits from a steady supply of foreign exchange from overseas Filipino remittances, tourism receipts and inflows from foreign direct investments. 


Philippine Bonds  

Philippine Bond Yields shifted higher in 2022 as the Bangko Sentral ng Pilipinas (BSP) increased its policy rate to 5.5% from 2% at the start of the year.

  • The yield curve steepened during the first half of the year as longer tenors rose due to spiking inflation while the shorter tenors followed during the second half as BSP began hiking rates. Policy rates generally impact the shorter end of the curve more than the longer end hence the delayed increase in that portion of the curve. The year saw a large jump in bond yields with the 10-year government security (GS) trading higher than 7.7% at one point. The 10-year GS started 2022 trading below 5%.
  • Philippine inflation likely peaked with analysts estimating an 8.3% rate for December. The BSP expects 2023 inflation to decelerate due to easing global oil and non-oil prices, negative base effect from transport fare adjustments and the impact of the BSP’s cumulative policy rate adjustments. Given the forecasted path for inflation, the government’s auction for long tenor bonds have been oversubscribed as investors lock in the high rates. Market expects yields to shift lower in 2023, particularly in the long end, as inflation ease and the growth outlook stabilize.
  • The BSP raised its inflation forecast for 2023 to 4.5%, still above the government’s 2% to 4% target. Inflation is expected to begin easing during the first quarter of 2023 due to the general slowdown in consumption after the holidays. Rate hikes are expected to continue with economists forecasting an additional 0.50% increase before finally pausing its tightening cycle. 2024 is projected to see inflation back to within the government’s 2% to 4% target.



FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) (2) (3) (4) (5) 6) (7)

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.