ADB expects Philippine economy to grow by 5% in ’12

The Asian Development Bank expects the Philippine economy to grow by five percent this year and by “six to seven percent over the medium term.”

ADB President Haruhiko Kuroda made the remarks Thursday shortly after he met with President Aquino.

Kuroda also described the Philippines as having “a quite balanced economy.”

“It has a very strong services sector,” the DB executive said, adding that the outsourcing, financial, distribution, and real estate sectors appear to be doing fine.

Robust

“The Philippines’ remittances … continue to increase in a very robust way,” he added.

As a result, the ADB believes that Philippine growth will hinge on consumption and investments, Kuroda said.

The Philippine economy grew 3.7 percent in 2011. The government expects economic growth to range from five to six percent this year.

But Kuroda pointed out that something must be done about the significant slowdown in exports.

“As you know, the Philippines’ major items are electronics goods. The Philippines is part of the East Asian supply chain of electronics goods (which has been upset by) the earthquake in Japan, the flood in Thailand. Both of them disrupted the … supply chain … and this affected the Philippine economy through the slowing down of exports,” Kuroda explained.

Cautious

He also mentioned that the financial crisis in Europe also affected the Philippines’ exports.

Kuroda said the ADB was optimistic about the short-term economic outlook of emerging economies in Asia, “although there could be some slowdown compared with 2010 and 2011.”

“But still we expect a very robust growth in Asia, particularly emerging nations or developing nations. Average growth rate could be around seven percent or seven percent-plus—quite a respectable rate of economic growth,” he said.

“There are, we feel, a few downside risks so we have to be cautious,” he added.

“Another potential downside risk is rising oil prices. At this moment, despite some slowdown in the global economy, oil prices are at relatively high levels,” Kuroda said.

Infrastructure

“If oil prices go up sharply, then Asia would be seriously affected. Still, we are optimistic about the short-term economic outlook growth in Asia,” he added.

Kuroda said the Philippines would also need to improve its governance and its infrastructure to accelerate economic growth.

“ADB is cooperating with the government of Philippines to improve governance and infrastructure … because infrastructure is the basis of sustained economic growth in the transport, energy, water, telecommunications (sectors)…. The Philippines must have better and more infrastructure in order to accelerate economic growth,” Kuroda said.

“The potential of the Philippine economy is very strong and, in the coming years and decades, the Philippines can maintain and even accelerate economic growth,” he added.