ADB says Philippines may fully recover from last year’s slump

The Asian Development Bank (ADB) expects the Philippines to partly recover from last year’s economic slowdown, saying that the likely increase in public spending and sustained growth in remittances will support consumption.

ADB expects the Philippine economy to expand by 4.8 percent this year compared with the estimated growth of below 4 percent last year.

The growth forecast for 2012, nonetheless, is still slow compared with the three decade-high growth of 7.6 percent registered in 2010.

“Strong private consumption backed by robust remittance inflows, increasing public investment, and gradual export recovery will support the Philippines’ economic recovery in 2012,” ADB vice president Stephen Groff said in a speech the other day during an economic forum organized by the Foreign Correspondents Association of the Philippines.

The ADB official said a 4.8-percent growth for the Philippines is attainable given strengths of the domestic economy, such as robust household spending, that may help cushion the impact of unfavorable economic developments abroad.

The government’s commitment to increase public spending this year is also expected to give boost to economic growth.

But Groff said that more strategies would have to be adopted for the Philippines to attain an even faster growth over the medium term.

He said the Philippines should diversify its export products, noting that significant dependence on electronics makes the country’s export earnings vulnerable in times of crisis.

Last year, the country saw its export earnings decline in the wake of the crisis in Europe and lackluster growth of the US economy. The US and the euro zone are two of the Philippines’ major export markets.

“This lack of diversification makes the Philippines quite vulnerable compared to its neighbors, while exports continued to grow despite the global slowdown,” Groff said.

He also suggested that the Philippines export more to other emerging economies, as these are seen to grow at a much faster rate than advanced economies.

The United States and Europe account for about 30 percent of Philippine export earnings.

The ADB official likewise stressed the importance of fulfilling the government’s commitment to increase public spending this year following the lower-than-programmed spending last year.

“Lower infrastructure spending largely reflects the administration’s efforts to improve governance and transparency in public projects. While this diligence is necessary and commendable, spending will have to increase to mitigate the impact of the deteriorating global environment,” Groff said.  Michelle V. Remo