ADB trims PH growth forecast for 2016

A laborer works on a road project in Makati City in this file photo. The Asian Development Bank has kept its 6.4-percent economic growth forecast for the Philippines this year but has projected a slower 6.3-percent expansion next year. AFP PHOTO/Jay DIRECTO

MANILA, Philippines–The Asian Development Bank (ADB) has kept its 6.4-percent economic growth forecast for the Philippines this year but has projected a slower 6.3-percent expansion next year.

The ADB’s forecasts for the Philippines in the next two years were both weaker than the Philippine government’s gross domestic product (GDP) growth targets of 7-8 percent for 2015 and 7.5-8.5 percent in 2016.

In a briefing during the launch of the Manila-based multilateral lender’s Asian Development Outlook 2015 report on Tuesday, Sona Shrestha, principal country economist of ADB’s Philippines country office, said one potential, although “minimal,” risk to economic growth this year was the looming power crisis about to hit Luzon—home to the country’s business and industrial hubs—during the summer season.

But Shrestha said the incentives to be granted by the government under the Interruptible Load Program (ILP) would ease the expected shortfall in power reserves. The ILP is offering perks to heavy power users that will use generator sets instead of sourcing electricity from the grid.

In general, 2015 looks to be a better year than 2014 as far as the Philippine economy was concerned, according to Richard S. Bolt, ADB’s country director for the Philippines.

Bolt cited expectations of improved government spending as well as modest inflation to result in faster growth this year than last year’s GDP expansion of 6.1 percent. Economic growth in 2014 was hampered by anemic public spending due to the “chilling effects” of the Supreme Court decision that stopped the flow of more money through the controversial Disbursement Acceleration Program or DAP.

The continuous initiatives to rehabilitate the areas flattened by Supertyphoon “Yolanda” (international name: Haiyan) in late 2013 would also help accelerate government spending this year, according to Bolt.

Apart from the improvement in government expenditures, sustained robust private spending would also help to bolster growth in 2015, Bolt said. Private consumption comprised more than three-fifths of last year’s GDP growth, the ADB noted.

As for inflation or the rate of increase in the prices of basic goods, it was expected to slow to an average 2.8 percent this year amid declining global oil prices, according to the report. However, a dry spell due to a potential El Niño during the first half of the year “could put upward pressure on prices,” the ADB said in a statement.

The looming power shortage on top of pending petitions for higher electricity tariffs might also jack up inflation, according to the ADB report.

For 2016, Bolt said GDP growth was expected to “slightly ease” to reflect “investor caution amid uncertainties due to the elections.” The next presidential election will be held in May next year.

“After May 2016, the new administration’s priorities and policies will have an important bearing on economic prospects,” the ADB report noted.

Inflation is also seen quickening next year as global oil prices might normalize and go up from this year’s levels, Bolt said.