File photo from EPA
MANILA, Philippines – The Asian Development Bank (ADB) has maintained its growth assumptions for the Philippines, with an expected expansion of the economy by 6.4% in 2015, and 6.3% next year.
The Asian Development Outlook (ADO) 2015 Supplement released Thursday, July 16, said the ADB has kept its assumptions for the Philippine economy, even as the gross domestic product (GDP) growth in the country fell to 5.2% in the first quarter, the slowest pace in over 3 years. (READ: PH to miss 2015 GDP growth target – economists)
Overall, ADB said that private investment and household consumption remain strong, supporting the maintenance of its growth forecasts for the Philippine economy.
Election-related spending is also expected to boost domestic demand through May 2016, when elections will be held, the report said.
Better public spending in Q2
Budget Secretary Florencio Abad said in a news conference on Thursday that government disbursements in the second quarter are expected to show some improvement, compared to the dismal performance in the first 3 months of the year.
Abad said the Department of Public Works and Highways spending for infrastructure went as high as P25 billion ($552.43 million) in June alone.
Year-to-date spending for infrastructure is still lower year-on-year even as it saw an increase of 40.3% in April alone.
In an interview with reporters on Wednesday, National Economic and Development Authority (NEDA) Director General Arsenio M. Balisacan expressed hope that merchandise exports will increase in June to offset the declines in April and May.
Philippine merchandise exports fell by 17.4% in May, the sharpest drop since December 2011, NEDA announced July 10. The Philippine Statistics Authority reported that total revenue from exports reached $4.9 billion in May, from $5.9 billion in the same period last year. (READ: PH exports post sharpest drop in nearly 4 years)
Lower growth forecast in developing Asia
ADB cut its 2015 growth forecast for developing Asia to 6.1% from 6.3 %, amid slower-than-expected economic activity in the United States and China.
ADB also projected 2016 growth for the region at 6.2%, down from the previous forecast of 6.3%.
“Slower growth in China is likely to have a noticeable effect on the rest of Asia given its size and its close links with other countries in the region through regional and global value chains,” said ADB chief economist Shang-Jin Wei.
Southeast Asia will see slower-than-previously forecast growth of 4.6% for 2015, weighed down by lower-than-expected first half performances in Indonesia, Singapore, and Thailand.
In 2016, the sub-regional economy is projected to expand 5.1%, below 5.3% estimated earlier.
In its report released in March, the ADB also projected that inflation in the Philippines will be at an average of 2.8% this year. (READ: Inflation eases to record-breaking 1.2% in June)
Next year, the ADB said that Philippine inflation is seen quickening to 3.3% on higher global prices for oil and other commodities.
"As inflation stays within the central bank’s 2% to 4% target range, the monetary authorities may maintain current policy settings for some time before resuming a gradual tightening," the ADB said in its March report.
Risks to the outlook include weaker-than-expected recovery in the major industrial economies and continued slow public spending despite government measures taken to improve budget execution, it added.
"There are risks to this forecast from El Niño weather conditions that are expected to last through the first half, as well as from possible power shortages and pending petitions for higher electricity tariffs," the March report said.
The ADB had said that higher rates of investment are needed to build on recent gains and raise employment to reduce poverty in the country.
"While the Philippines has posted solid growth in recent years, unemployment and underemployment remain high," the March report said. – Rappler.com
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