The Asian Development Bank has slashed its growth forecasts for the Philippines for this year and next, saying the economy may no longer expand as fast as earlier expected because the lackluster global economic picture is dampening its exports.
For 2011, ADB has cut its growth projection to 4.7 percent from 5.1 percent, saying the challenges in the external environment were likely to cause the Philippines to fall short of the official growth target of 5 to 6 percent.
ADB has also revised its growth forecast for 2012 to 5.1 percent from 5.3 percent, taking into account expectations that the global economy would not grow as fast as desired.
The government is aiming for an economic expansion of at least 7 percent starting next year.
The multilateral agency said the lower-than-expected spending by the government in the first half was also a factor that influenced its decision to cut the growth forecasts.
Sluggish exports and public underspending, the ADB said, should take its toll on the country’s employment situation and overall income levels.
“Job creation remains lackluster. Further increases in investments along with policy and governance reforms are needed to boost jobs,” ADB chief economist Changyong Rhee said in a statement.
Latest government data showed that the country’s exports amounted to $4.43 billion in July, down 1.7 percent from $4.51 billion in the same month last year.
This slowed down the average growth in exports for the first seven months of the year to only 3.3 percent to $28.25 billion from $29.19 billion in the same period last year. Earlier this year, economists were expecting exports to grow at double-digit levels.
The unemployment rate stood at 7.2 percent last April. This was an improvement from 8 percent in the same month last year, but ADB said this figure was still high. Moreover, the underemployment rate stood at 19.4 percent, rising from 17.8 percent last year.
Neeraj Jain, ADB country director for the Philippines, said the Philippines should intensify efforts to complete projects under the Public-Private Partnership (PPP) program to help boost growth. Under the PPP, the government invites private firms to invest in public infrastructure projects like power facilities, airports and major roads.
Jain said the realization of ADB’s growth projection for next year was partly hinged on the ability of the country to fulfill infrastructure projects that have been lined up by the government.