The Asian Development Bank (ADB) has projected the Philippine economy to expand by 6 percent this year on the back of robust domestic demand even as the weak external trade prospects caused the Manila-based multilateral lender to cut its 2016 forecast.
“The ADB expects the Philippines’ strong growth performance to continue in 2016 and 2017,” said Sona Shrestha, principal country economist at ADB’s Philippines country office, at the launch of the Asian Development Outlook (ADO) 2016, the lender’s flagship annual economic publication.
The growth forecast for this year as well as the 6.1 percent for next year were both higher than the 5.8-percent gross domestic product (GDP) expansion last year.
“While the Philippines continues to experience headwinds, including a strong El Niño weather event, which has affected agriculture, as well as weak external demand, economic growth remains strong. Sustaining this growth will require the continuation of policies that support infrastructure and human capital development, improvements to the investment climate and better governance,” Richard Bolt, ADB country director for the Philippines, said in a statement.
The projection for 2016 was brought down from 6.3 percent in the previous ADO report as “the external economic environment turned out to be slower [this year] than anticipated [before],” Shrestha said.
ADB macroeconomics research division principal economist Donghyun Park said the revised forecast for the Philippines was “part of the broader downgrade overall” across the region amid a “very uncertain global environment.”
ADO 2016 projected growth in developing Asia to soften to 5.7 percent this year and next from 5.9 percent last year.
“Net external demand will be a drag to 2016, but the 2017 outlook shows economies of major trading partners picking up,” Shrestha said.
In the case of the Philippines, however, prospects are seen improving in 2016 compared with 2015 as solid domestic demand was expected to further drive growth, Shrestha said. “In terms of sectors, manufacturing and services will be key drivers of growth,” she added.
Also, both domestic and foreign direct investments are seen accelerating this year, Shrestha said.
Higher consumer spending was likewise expected after the government approved salary increases for employees of agencies as well as state-run corporations, she added.
With regards the upcoming elections in May, the ADB saw “a degree of uncertainty” among investors, Shrestha said, although they “do not anticipate a major change in the direction of policies” by the next administration.
Election-related spending, meanwhile, would boost the mass media, services and transportation industry, she added.
However, Shrestha said that while the government has reported a decline in the poverty incidence last year, the rate of 26 percent “remains high.”
Another challenge was the “stubbornly high” youth unemployment rate, which at 14.4 percent was more than double the national unemployment figure, Shrestha noted.