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ADB lowers PH growth forecasts

Asian lender says trade wars, growing debt adding to financial risks
By: - Reporter / @bendeveraINQ
/ 05:38 AM September 27, 2018

The Asian Development Bank has cut its growth forecasts for the Philippines for the next two years and raised inflation projections for 2018 and 2019 as recent moves to temper high consumer prices would take time to show results.

Notwithstanding the expected slower gross domestic product (GDP) growth amid elevated prices, Kelly Bird, the ADB’s country director for the Philippines, highlighted a more investment-led Philippine economy, which he said augured well to sustaining expansion in the medium term.

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In its Asian Development Outlook 2018 Update report released Wednesday, the Manila-based lender downgraded its 2018 GDP growth projection for the Philippines to 6.4 percent from 6.8 percent previously, owing to the “unexpected softening” of first-half expansion to 6.3 percent following the three-year low 6-percent growth in the second quarter.

Bird blamed slower agricultural output, lower net exports as imports surged, as well as higher inflation for the downgraded outlook.

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For 2019, the ADB also cut its growth forecast to 6.7 percent from 6.9 percent previously.

But for Bird, “6.4 percent is still a very robust economic growth rate” for this year.

Bird added that unlike a consumption-led economy in the past, growth in the near term would continue to be investment-driven, especially with the rollout of big-ticket infrastructure projects.

As for inflation, the ADB sees the rate of increase in prices of basic commodities hitting an average of 5 percent this year, up from the previous forecast of 4 percent.

Next year, inflation would ease to 4 percent, slightly higher than the ADB’s previous projection of 3.9 percent.

“The recent buildup of inflationary pressure should moderate next year as tighter monetary policy reins in inflation expectations,” the ADB said.

So far this year, the policy-setting Monetary Board of the Bangko Sentral ng Pilipinas (BSP) already raised key interest rate by 100 basis points.

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The BSP is widely expected to again raise the policy rate by 50 bp today.

“Rising global commodity prices should maintain inflationary pressures,” although “the removal of administrative constraints and non-tariff barriers on food imports and implementation of productivity enhancement programs for agriculture should help stem supply side constraints on rice over time,” the ADB said.

The Asian Development Bank also said that trade conflicts, rising debt and the potential impact from rising interest rates in the United States could dampen growth in the coming year.

The regional lender said that it expected the region’s economic growth to remain at a robust 6 percent in 2018 but to slip to 5.8 percent next year.

It cited looming financial and trade shocks as the biggest sources of potential trouble. —WITH A REPORT FROM AP

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TAGS: Asian development bank, gross domestic product (GDP), growth forecasts, Inflation
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