ADB revises Philippine growth forecast to 6.4 percent from 6 percent for 2016
The Asian Development Bank (ADB) projected a positive outlook for the Philippines, expecting the country to sustain its robust growth for 2016 and 2017, driven by strong investment private consumption and the government's plan to accelerate investment in infrastructure and human capital.
In an update of its Asian Development Outlook 2016, the regional development bank forecasts gross domestic product to grow 6.4 percent for 2016, up from its projection in March of six percent. Meanwhile, their projection for 2017 dipped slightly to 6.2 percent but still above the previous forecast of 6.1 percent.
"The outlook for the Philippine economy remains strong amid buoyant investment and domestic consumption," Richard Bolt, ADB Country Director for the Philippines, said in a press conference on Tuesday.
On Tuesday, the peso closed at P48.25 against the United States dollar, the currency's lowest level in seven years. Central bank governor Amando Tetangco Jr. said the continuing uncertainty on the direction of the US Federal Reserve's policy and strong foreign exchange demand for fixing and corporate investments.
Sought for comment, Bolt said: "In terms of the peso there (are) wider reasons for that... It's an external factor at this stage."
When asked if President Rodrigo Duterte's recent controversial statements is one of the reasons for the slower growth forecasts for next year, Bolt said it's too early to tell if there is indeed an effect.
Services, particularly retailed trade, buoyant business process outsourcing industry and growing tourism are the key growth drivers for the forecast period, with international visitor arrivals up by over 13 percent year-on-year in the first half.
The ADB expects inflation to remain subdued at 1.8 percent for 2016. "However, inflation is seen moving up to average 2.8 percent in 2017, as global oil prices and domestic demand rise."
Same with the Duterte's war on drugs where more than a thousand people have been killed in police operations and extrajudicial killings have affected investors' sentiments, the ADB official said" "It's hard to tell at this stage but again obviously we track business sentiments."
"We have to look at the numbers here. What's coming up in the numbers in terms of business confidence, what's affected that and the moment we don't have those numbers," he said.
The surge in investment and consumption has seen the economy expand by 6.9 percent in the first half of 2016. Election-related spending and consumption along with booming fixed investments from private and public sectors, were the key drivers.
"Underpinning the strong performance of consumption was a rise in job creation, with the unemployment rate falling to 5.4 percent in July 2016 from 6.5 percent the year earlier, and remittances from Filipinos overseas," said Bolt.
The ADB said services generated two thirds of the growth, with retail trade business process outsourcing and real estate activity were the prime movers. Meanwhile, merchandise exports remained subdued amid soft global demand.
The study says a continuation of the strong growth will depend on advancing the government's reform agenda. Among these are measures to address infrastructure bottlenecks, stronger efforts to develop rural and regional areas, and enhancing transparency and accountability in government.
What's encouraging about the Duterte administration is it's message of continuing programs in the previous government of former President Benigno Aquino III which worked well such as infrastructure programs on public and private partnerships, conditional cash transfer and K to 12 programs.
"These are the kinds of things that businesses and investors are really looking forward for, continuing and maintaining key ones, maintaining macroeconomic policies including fiscal trade policies and further emphasis on opening up...That's very clear statements on ways how to boost foreign direct investments in the country," said Bolt. Emmanuel Tupas
