The Asian Development Bank (ADB) raised its forecast for the Philippines’s GDP expansion this year to 6.7 percent, although Socioeconomic Planning Secretary Ernesto M. Pernia said this is just “the minimum” growth the government is now expecting given the economy’s performance thus far.
In its Asian Development Outlook (ADO) Supplement, the Manila-based multilateral development bank also upgraded its 2018 growth forecast for the Philippines to 6.8 percent. This is on the back of the Duterte administration’s strong infrastructure push.
In an earlier ADO Update 2017 released in September, the ADB projected the country’s GDP expansion at 6.5 percent this year and 6.7 percent in 2018.
“This outlook assumes that growth in the government’s infrastructure program will accelerate, supported by improvements in budget execution, with more large investment projects under way,” the ADB said in its report.
Pernia told BusinessMirror on Wednesday that the ADB’s new estimate was expected, given that the economy already posted a 6.7-percent growth in the first three quarters of the year.
He said the 6.7 percent is just “the minimum” growth expected by the government this year. The official government estimate is 6.5 percent to 7.5 percent for the year.
“This [forecast] is just our minimum [expected] growth for this year because we’re already at 6.7 percent in the third quarter,” Pernia said.
The ADB explained that its revision was due to the increased government spending for infrastructure. This makes it easier for the country to meet its infrastructure-spending target of 5.3 percent of GDP.
Apart from this, the ADB said household consumption remained strong despite a slowdown compared to 2016.
Other reasons, ADB said, included a positive net exports growth in the January-to-September period and robust business-process outsourcing, finance and real-estate services growth, which accounts for nearly 60 percent of Philippine GDP.
The ADB added that strong food-manufacturing growth, which contributes about 30 percent to GDP growth, and the recovery of the farm sector from the El Niño phenomenon last year are also expected to boost the economy’s performance this year and next year.
“Infrastructure investment continued to play important roles in Indonesia, the Philippines and Thailand. Private consumption aided by benign inflation has provided strong support to most subregional economies in 2017,” ADB said.
Meanwhile, the ADB said economic expansion in developing Asia will accelerate to 6 percent in 2017 due to stronger-than-expected exports and domestic consumption. Excluding Asia’s newly industrialized economies, growth is now expected at 6.5 percent this year.
Growth for Southeast Asia, the ADB reported, is picking up faster than initially projected, with GDP set to expand by 5.2 percent in 2017 and 2018, compared to the bank’s September 2017 forecasts of 5 percent and 5.1 percent.
“Developing Asia’s growth momentum, supported by recovering exports, demonstrates that openness to trade remains an essential component of inclusive economic development,” said Yasuyuki Sawada, ADB chief economist. “Countries can further take advantage of the global recovery by investing in human capital and physical infrastructure that will help sustain growth over the long term.”
Further, the ADB said rising commodity prices have not yet driven inflation across the region, with consumer price inflation tame and stable. Price inflation is unchanged from previous projections of 2.4 percent in 2017 and 2.9 percent in 2018.
However, inflation in the Philippines was slightly higher at 3.2 percent in the January-to-November period. Nonetheless, this is still within the Central Bank’s target of 2 percent to 4 percent this year.
Image credits: Nonoy Lacza