Atin Ito First Filipino Community Newspaper in Ontario
Manila-based Asian Development Bank (ADB) has revised lower its Philippine economic growth forecast to six percent this year from the previous 6.2 percent although it noted of positive factors that would ensure domestic demand will continue to pick up and public investment will be sustained.
In its latest April 2024 Asian Development Outlook (ADO) report released Thursday, April 11, ADB said that despite the downgraded 2024 forecast from its December 2023 ADO estimate, the country’s gross domestic product (GDP) is seen to expand by 6.2 percent in 2025 with moderating inflation and easing monetary policy rates.
The 6.2 percent GDP growth for 2025, meanwhile, is anchored on an expected easing of monetary policy this year, currently at 6.5 percent benchmark rate.
The reduced six percent GDP growth outlook for 2024, however, is still faster than the actual 5.6 percent output growth in 2023, but lower than the government’s 6.5 percent to 7.5 percent projection.
Based on the report, the “Philippine economy is expected to post faster growth this year and the next on the back of slowing inflation, stronger and broad-based domestic demand, and higher public investment” and will continue to be the “fastest growing economies in Southeast Asia this year and the next.”
For this year, despite the positive outlook, the report pointed to “severe weather events such as a prolonged El Niño dry weather episode and possible strong typhoons later in the year due to the La Niña phenomenon” that would add to price pressures and impact on inflation.
ADB expects the country’s inflation will ease to 3.8 percent in 2024 from six percent in 2023, and further decline to 3.4 percent in 2025.
“Food inflation has slowed from last year though it remains high for some commodities, particularly rice,” it said, adding that “reduced tariffs on some food items, including rice, corn, and pork were extended to December 2024 to help contain food inflation” and this will “help reduce inflationary pressures due to El Niño and cases of African swine fever.”
ADB further noted that should inflation continues to stay within the central bank’s two percent to four percent target for the year, “monetary authorities may cut policy rates in the second half of 2024.” The Bangko Sentral ng Pilipinas’ key rate has been left unchanged at 6.5 percent since October 2023.
“A sharper slowdown in major advanced economies, heightened geopolitical tensions, and higher-than-expected global commodity prices could also weigh on growth,” the report said.
Despite all these challenges, ADB Philippines Country Director Pavit Ramachandran said the economy’s growth momentum “is picking up speed, driven by the government’s efforts to improve budget execution, mobilize additional revenue, and pursue reforms to boost the investment climate. Investments on large public infrastructure projects, as well as much needed social services, will boost government expenditures and bode well for the economy in the long run.”
The report also noted that the country’s current account deficit will narrow this year and in 2025, supported in part by strengthening services exports.
“Promoting higher levels of private sector participation in the economy will be vital to further raise growth and productivity. Building on structural reforms and further measures to enhance the investment climate will support this agenda,” it added.
Also, it said tourism and business process outsourcing “should remain buoyant, while merchandise exports will improve moderately in 2025.”
“The steady increase in remittances from overseas workers will continue to help lift the current account. Lower global oil prices will also ease import costs,” it added.
The April 2024 ADO report said generally, developing economies in Asia and the Pacific are expected to perform better and should grow by 4.9 percent on average this year “as the region continues its resilient growth amid robust domestic demand, improving semiconductor exports, and recovering tourism.”
India is expected to remain a major growth engine in Asia and the Pacific, with a seven percent expansion this year and 7.2 percent in 2025, said ADB. China’s GDP is forecast to slow to 4.8 percent this year and 4.5 percent next year.
“We see strong, stable growth for the majority of economies in developing Asia this year and next,” said ADB Chief Economist Albert Park. “Consumer confidence is improving, and investment is resilient overall. External demand also appears to be turning a corner, particularly with regard to semiconductors,” he added. — Lee C. Chipongian
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