ADB increases PH growth forecast-A A +A
By Mia A. Aznar
Wednesday, October 2, 2013
MANILA–The Asian Development Bank (ADB) increased its growth forecast for the Philippines for 2013 and 2014 to seven percent and 6.1 percent, respectively, based on the update of the Manila-based lender’s Asian Development Outlook (ADO) 2013.
The forecasts were previously at six percent and 5.9 percent in the ADO report last April.
In his presentation during a briefing Tuesday, ADB senior country economist for the Philippines Norio Usui said robust growth will continue in the next two years “based on strong consumption and an improvement in investment.”
“Improved macroeconomic fundamentals mitigate risks posed by global financial market volatility,” he said.
The latest ADB growth forecasts for the country this year is the higher end of the government’s six to seven percent target for the year while projection for next year is within the 6.5 to 7.5 percent expansion target.
In the first half this year, the domestic economy grew, as measured by gross domestic product (GPD), by 7.6 percent, higher than the 6.4 percent same period in 2012.
Higher than target
Domestic expansion in the second quarter this year at 7.5 percent, up compared to year-ago’s 6.3 percent, as well as in the first half are higher than the government’s full-year target and is similar to that of China’s expansion.
Usui said key factors in the bright growth projections include positive market sentiment, favorable investment indicators, higher public spending particularly on infrastructure, modest inflation, recovery of exports, and mitigated risks from global market volatility due to better macroeconomic fundamentals.
He, however, cited that amid the continued expansion of the domestic economy there is a need to focus more on the manufacturing sector as additional growth driver.
He said the services sector, which include the business process outsourcing (BPO), is a good growth driver but this employs mostly graduates of tertiary education.
He said there are a lot of Filipinos who graduated from high school who are employable only if the manufacturing sector is strengthened.
“Productivity means everything to your economy. Without productivity the high growth cannot be sustained in the future,” he said.
The ADB economist said there is also a need to resolve the long-standing problem on infrastructure and cost of doing business.
The multilateral lender projects inflation to remain within the government’s assumption this and next year with the figures at three percent for this year and 3.5 percent for next year.
The government’s inflation target for this year is a band between three to five percent while it is two to four percent for 2014.
In the first eight months this year, rate of price increases averaged at 2.8 percent with the August level at 2.1 percent from month-ago’s 2.5 percent.
The lender, however, cut its economic growth forecast for developing Asia on, citing weakness in region’s two largest economies China and India and jitters over plans to scale back U.S. stimulus that destabilized financial markets.
ADB said it expects the region’s emerging economies to grow by six percent this year, down from 6.6 percent predicted in April.
The ADB also cut its 2014 growth forecast, to 6.2 percent from 6.7 percent.
“Developing Asia is challenged to sustain its growth momentum,” the bank said in an update to its Asian Development Outlook report, which covers 45 developing or newly industrialized countries in Asia and the Pacific but excludes Japan.
The ADB said growth in China is softening after authorities took action to rein in credit growth and the shadow banking industry, part of a wider effort to reorient the economy away from exports and investment and toward more sustainable domestic consumption.
“Slower growth is the price of structural reform for the longer term,” the report said.
China’s economy, the world’s second biggest, is now expected to expand 7.6 percent, down from 8.2 percent forecast earlier this year.
The country’s communist leaders are trying to reverse a painful, extended slowdown that dragged growth down to a two-decade low of 7.5 percent in the second quarter.
In India, growth is slowing because industry and investment are hindered by poor infrastructure and long delays in structural reforms, the bank said in cutting its forecast to 4.7 percent growth from 6 percent.
The bank also lowered its Southeast Asia forecast because of lackluster exports and moderating investment in Indonesia, Thailand and Malaysia, though stronger than expected growth in the Philippines partially offset the decline.
Published in the Sun.Star Cebu newspaper on October 03, 2013.