The Asian Development Bank has raised its gross domestic product (GDP) growth forecasts for the Philippines for this year and next year, with the country expected to lead economic expansion among emerging Asean economies.
In its Asian Development Outlook Supplement report released yesterday, the ADB jacked up to 6.5 percent from 6.4 percent its Philippine GDP growth projection for 2017.
As such, the Manila-based multilateral lender’s forecast for this year is now within the government’s 6.5-7.5 percent target range.
The ADB’s updated 2017 growth projection for the Philippines is higher than Vietnam’s 6.5 percent, Indonesia’s 5.1 percent, Malaysia’s 4.7 percent, Thailand’s 3.5 percent and Singapore’s 2.4 percent.
It also raised to 6.7 percent from 6.6 percent its Philippine growth forecast for 2018.
However, the ADB’s 2018 projection remained below the government’s target of 7-8 percent growth next year.
In the report, the ADB noted that “the Philippine GDP grew by 6.4 percent in the first quarter of 2017, a moderation from 6.9 percent in the same period in 2016 partly reflecting a base effect from election spending last year.”
During the first quarter, “investment and consumption were the key drivers of growth,” it said, adding that “merchandise exports improved but not enough to offset imports.”
“By sector, services and manufacturing remained the major contributors to growth. Services generated nearly two-thirds of GDP growth, spurred largely by trade, business process outsourcing and finance. Manufacturing growth remained robust. Agriculture output has recovered after being hit by a dry spell last year caused by El Niño,” the ADB added.
The lender was bullish about the government’s plan to fast-track infrastructure spending while also pursuing comprehensive tax reform, which aims to ease the burden on income earners while slapping additional or new taxes on consumption.
“The government is making progress in ramping up infrastructure investment. In addition, tax reform likely to be approved in the second half of 2017 will unleash purchasing power in 2018 through lower personal income tax,” it said.
In a statement, the ADB said “growth projections for Southeast Asia are expected to remain at 4.8 percent in 2017 and 5 percent in 2018, with accelerating growth for Malaysia, the Philippines and Singapore, although this trend is slightly dampened by the slower-than-anticipated expansion in Brunei Darussalam.”
“Robust domestic demand—particularly private consumption and investment—will continue to support growth” in the Southeast Asian region, the ADB said.
Across what it calls “developing Asia,” the growth forecasts were upgraded to 5.9 percent (from 5.7 percent previously) in 2017 and 5.8 percent (from 5.7 percent) in 2018.
The ADB attributed the more bullish forecast for 2017 to “stronger-than expected export demand in the first quarter of this year.”
“The smaller uptick in the 2018 rate reflects a cautious view on the sustainability of this export push,” it added.
“Developing Asia is off to a good start this year with improved exports pushing growth prospects for the rest of 2017. Despite lingering uncertainties surrounding the strength of the global recovery, we feel that the region’s economies are well-placed to face potential shocks to the outlook,” Yasuyuki Sawada, the ADB’s chief economist, said.—BEN O. DE VERA