ADB raises ’11 growth projection for PH to 5%

MANILA, Philippines—The Asian Development Bank has raised its 2011 growth projection for the Philippines, saying that its earlier forecast did not take into account the rise in domestic investments.

From the prior growth estimate of 4.6 percent for this year, ADB now expects the economy as measured by gross domestic product—total output of goods and services within Philippine borders—to expand by 5 percent.

Norio Usui, senior economist of ADB for the Philippines, said Wednesday the previous growth forecast of ADB was made in September last year and did not consider the last quarter’s performance.

He said the Philippines’ growth of 7.3 percent last year, the fastest in 34 years, came as a surprise for the economists of ADB and other institutions.

The rate of expansion last year, he said, was boosted by the unusual rise in investments by Filipino firms.

“Based on that [higher investments], we changed our forecast for 2011,” Usui told reporters on the sidelines of the launch of ADB’s 2011 outlook.

ADB’s latest projection is within the government’s own assumption of 5 to 6 percent, but slower than last year’s growth of 7.3 percent.

Economists agree that most developing Asian countries would post slower growth rates this year because expansion rates last year were unusually high.

Usui said that while growth this year would be faster than earlier projected, there remain challenges that the Philippines has to overcome to improve its competitiveness.

These include the country’s huge debt and inability to capture more foreign direct investments (FDIs). He said the country needs to spend more on infrastructure and improve governance policies to corner more investments.

Meanwhile, Usui said the ability of monetary authorities to keep the increase in consumer prices within manageable levels was encouraging.

Latest government data showed that inflation hit 4.1 percent in the first quarter, prompting the Bangko Sentral ng Pilipinas to state that the full-year inflation target of 3 to 5 percent was still attainable.

But while the latest inflation number falls within the full-year ceiling, some economists said it was still likely that the rate would breach the limit of 5 percent.

Critics said the BSP was quite late in raising interest rates, which could prevent inflation from accelerating.

Central banks of neighboring countries started raising rates last year, but the BSP raised its own key policy rates only last March 24.

But the ADB said there was nothing to be criticized about the move of the BSP to raise interest rates later than its counterparts.

Usui noted that inflation in the Philippines has been more benign than price movements in neighboring countries.

“The Philippine’s central bank is doing a good job in managing inflation,” the ADB economist said.