THE Philippine economy will continue its robust expansion through next year, but its growth outlook has been slightly lowered as reduced government spending, higher inflation, and monetary tightening dampen activity, says a new Asian Development Bank (ADB) report released September 25.
Gross domestic product growth (GDP) is now expected to grow by 6.2 percent in 2014, down from the forecast of 6.4 percent in April, and by 6.4 percent in 2015, compared with 6.7 percent in April, according to an update of ADB’s Asian Development Outlook (ADO) 2014, its annual economic publication released in April.
Still, comparative statistics show the country still has the highest GDP growth forecast among the Association of Southeast Asian Nations-6 (ASEAN-6) members for 2014-2015.
The slight deceleration comes with the slowdown in Philippine government spending, partly reflecting cautious spending by government agencies amid concerns over the misuse of public funds. Higher inflation and associated monetary tightening are also expected to adversely impact on growth.
In the first half of 2014, the economy grew 6 percent on the back of export recovery and private consumption and investment expansion. Growth for the rest of this year and in 2015 hinge on expectations that post-typhoon reconstruction picks up, government fiscal disbursement improves, and exports benefit from brighter prospects in the major industrial economies.
“Consumption and investment remain strong, and exports are recovering,” said Richard Bolt, ADB country director for the Philippines. “Accelerating infrastructure projects, taking measures to strengthen competition, and increasing access to finance can boost growth and create jobs.”
Exports of goods and services in the first half of the year reversed a contraction in the first half of 2013 to rebound by 11.8 percent by volume. Export gains were notable in electronics including semiconductors. Imports of goods and services also recovered, but at a slower pace of 5.7 percent.
Foreign direct investment, though low compared with other countries in the region, jumped 77 percent in the first half of 2014 to US$3.6 billion-and almost doubled in 2013 to $3.8 billion from an annual average of about $2 billion in 2008-2012. Central bank surveys show business sentiment is generally positive.
But despite strong GDP growth averaging 6.3 percent since 2010, job generation is insufficient, said the update.
“Underemployment remains high at 18.3 percent of those employed because new jobs are largely part time or informal. A stronger manufacturing sector-which currently generates 8 percent of total employment-and further expansion of tourism and other service industries, would create more and better-paid jobs,” it added.
The Philippine economy mirrors a parallel slowdown in the main economies of Southeast Asia.
The report noted that except for Malaysia, “aggregate growth is moderating in 2014, slowed by stabilization policy and weaker commodity export prices in Indonesia, political disruption in Thailand, a government spending slowdown in the Philippines, and soft domestic demand in Vietnam.”
Updated aggregate growth in the ASEAN-6 is now expected to be 4.6 percent in 2014 from 5 percent forecast in April, and 5.3 percent in 2015 from 5.4 percent.
Indonesia’s growth has been reduced to 5.3 percent from 5.7 percent for 2014, and 5.8 percent from 6 percent for 2015; Singapore to 3.5 percent from 3.9 percent in 2014 and to 3.9 percent from 4.1 percent in 2015; Thailand to 1.6 percent from 2.9 percent in 2014 and to stay steady at 4.5 percent next year; and Vietnam to 5.5 percent from 5.6 percent in 2014 and to 5.7 percent from 5.8 percent in 2015.
In contrast, Malaysia’s GDP is seen to accelerate in 2014 to 5.7percent from the April forecast of 5.1 percent and to 5.3 percent from 5 percent for 2015. (Philexport)