ADB sees 4.8% growth for Philippines

The Asian Development Bank sees the Philippine economy growing 4.8 percent next year, below the growth rate desired by the country’s economic officials but nonetheless faster than the growth estimates for this year.

The expectation of the ADB that the Philippines would post a faster growth rate by 2012 already took into account the possibility that the debt crisis in the eurozone would be prolonged and could even worsen.

Anticipated growth drivers for the Philippines next year are remittances, which should continue fueling household consumption, and a likely increase in government spending after budget officials were criticized for underspending this year.

For 2011, the ADB said it expected the Philippines to grow 3.7 percent. This was consistent with the government’s pronouncements that the domestic economy might grow by less than the minimum target of 4.5 percent this year on account of anemic demand for the country’s exports given the crisis in Europe as well as the sluggish growth of the United States.

The government was hoping the country could grow between 4.5 and 5.5 percent this year and then accelerating to the ideal growth of at least 7 percent in 2012 and throughout the medium term.

In its latest report on its outlook for economies in East Asia, the ADB said the region was expected to continue growing at a decent pace next year, but the growth rates were seen to be below 7 percent. The ADB also said that economies in the region would take a significant hit should the crisis in the eurozone worsen.

“The eurozone sovereign debt crisis has continued to worsen, and would have serious yet manageable repercussions to East Asia should it evolve into a full-blown financial and economic crisis,” the ADB warned.

Compared with the 4.8-percent growth forecast for next year for the Philippines, the ADB’s growth estimates stand at 4.5 percent for Thailand, 4.7 percent for Malaysia, 6.3 percent for Vietnam, 6.5 percent for Indonesia, 5 percent for Hong Kong, 4 percent for Singapore and 4.1 percent for Taiwan.

The bank said the crisis in the West has the potential not only to cut exports of emerging markets like those from East Asia, but also to cause volatility in foreign portfolio inflows. This was because the crisis in the West could either bring too much inflows to Asia or cause capital flight if investors become too risk-averse and decide to hold on to cash.

The ADB said a prolonged crisis could also disrupt trade as the cost of borrowing, such as that for purposes of funding trade, could increase.

“The cautiously optimistic outlook for emerging East Asia is subject to major downside risks: a deep recession in both the eurozone and the US; protectionism or tight trade finance; destabilizing capital flows; and persistent or resurgent inflation,” the ADB said.

The ADB added that given the likely global economic picture for 2012, the Philippines and other countries in East Asia were advised to implement initiatives that would strengthen their domestic economies regardless of what was happening offshore.

One of these initiatives was to increase intraregional trade to rely less on export earnings from the developed countries.