ADB cuts growth forecast for PH to 5.9%

The Asian Development Bank (ADB) sees more modest prospects for the Philippine economy this year following the slower-than-expected expansion in the third quarter.

Despite the deceleration, ADB still considered the country’s expected performance healthy, especially relative to the rest of the region.

“Driven largely by strong domestic demand, GDP growth in the Philippines picked up to 6 percent in the third quarter, bringing growth in the first three quarters to 5.6 percent,” ADB said in its Asian Development Outlook (ADO) supplement released this week.

“Private investment recorded robust expansion and household spending was supported by higher employment, low inflation and remittance inflows from Filipino workers overseas,” the Manila-based multilateral lender said.

For all of 2015, the country is seen growing 5.9 percent, lower than the bank’s previous forecast of 6 percent. The new forecast falls short of the government’s goal of a growth of at least 7 percent. The growth forecast for 2016 was maintained at 6.3 percent

The whole of Southeast Asia is seen growing by 4.4 percent this year and 4.9 percent in 2016.

In the third quarter, government expenditure accelerated rapidly, with public expenditure rising by 41.2 percent as budget execution was enhanced.

Net external demand weighed on the economy in the first three quarters, however, reflecting brisk expansion in imports on strong domestic demand and only a modest rise in merchandise exports. The unexpectedly sharp drop in net external demand prompted a small downward revision in the growth forecast.

On the supply side, services and manufacturing were the key growth drivers. Services generated two-thirds of gross domestic product (GDP) growth in the first three quarters, spurred by transport, communications, retail trade, business process outsourcing and real estate.

Manufacturing generated nearly a fourth of the increase in GDP, supported by domestic demand. Agricultural output was nearly flat in the first three quarters as the El Niño-induced drought curbed farm production.