ADB slashes 2023 economic growth forecast for PH to 5.7%

MANILA  -The Asian Development Bank (ADB) revised downward its gross domestic product (GDP) growth forecast for the Philippines to 5.7 percent in 2023 from the 6 percent forecast last April.

The multilateral lender said in a statement, which accompanied an update of its Asian Development Outlook (ADO) 2023 report issued Sept. 20, that the downscaled forecast was due to high inflation as well as the potential effects of adverse developments across the world.

Still, ADB maintained its forecast of a 6.2-percent GDP growth for the Philippines in 2024. This, in turn, was based on expectations that household consumption and public spending on infrastructure and social services will contribute to the economy’s expansion.

“The Philippines’ growth story remains strong despite an expected moderation in 2023 (from the 7.6-percent growth recorded in 2022),” said ADB Philippines Country Director Pavit Ramachandran.

“Public investment and private spending fueled by low unemployment rate, sustained increase in remittances from Filipinos overseas, and buoyant services including tourism will support growth,” Ramachandran said in a statement.

He added that the national government’s large infrastructure projects should further stimulate consumption, boost jobs and spur more investment.

In a briefing with journalists when the ADO update was launched, ADB’s Dulce Zara said one of the reasons for the forecast downgrade was the weakening domestic demand especially after an election year when related activities bump up economic expansion.

Weakening demand and shrinking government disbursements were blamed for a 4.3-percent GDP growth in the second quarter this year, which was significantly lower than the common forecast of 6 percent.

Zara, who serves as senior regional cooperation officer in ADB’s Southeast Asia Department, said another reason for cutting down the 2023 growth forecast was the decline in Philippine exports.

Last Sept. 8, the Philippine Statistics Authority said that for the January to July period, exports dropped by 8.2 percent to $41.1 billion from $44.8 billion.

According to Ramachandran, the actual GDP growth readout might be lower than ADB’s forecast considering global headwinds such as geopolitical tensions and a sharper-than-expected slowdown in major advanced economies.

The ADO 2023 report’s September edition says that higher tourism-related receipts, sustained inbound remittances, and strong service exports—particularly from business process outsourcing—will help offset weak merchandise exports.

Across Asia and the Pacific, ADB said growth in the region was expected to remain solid, although risks to the outlook are rising.

The region’s developing economies are forecast to grow 4.7 percent this year, a slight downward revision from a previous projection of 4.8 percent. Similarly, the growth forecast for next year is maintained at 4.8 percent.

For the Southeast Asia region alone, which includes the Philippines, the growth outlook is cut to 4.6 percent this year from an earlier projection of 4.7 percent due to weaker export demand.