Outlook brightens on strong exports

THE ASIAN Development Bank (ADB) has raised its 2017 and 2018 economic growth forecasts for the Philippines, as the Manila-based lender offered a rosier outlook for Asian economies on the back of surging global demand for the region’s exports and low oil prices.

In a supplement to its Asian Development Outlook published yesterday, the ADB said it now expects the Philippine economy to expand by 6.5% this year, a step up from its previous 6.4% forecast it tipped in April this year.

If realized, economic growth will slow from the upwardly adjusted 6.9% clip last year.

For 2018, Philippine GDP is expected to grow by 6.7%, from its previous 6.6% outlook.

The revised figures for the Philippines match the GDP forecast numbers the ADB pencilled in for Vietnam for 2017 and 2018. That expectation meant the two countries will tie for the spot as Southeast Asia’s fastest-growing economy.

The 2017 forecast for the Philippines falls at the lower end of the Duterte government’s official 6.5-7.5% target band for the year, but the 2018 outlook is dimmer than the 7-8% expected by the administration.

While an upgrade, the ADB growth estimates for the Philippines are less sanguine than other multilateral lenders’ projections.

The International Monetary Fund sees GDP growth at 6.8% this year and 6.9% in 2018. The World Bank last July 1 revised down its forecast to 6.8% this year from 6.9% it offered in April, while keeping the 6.9% outlook for 2018.

“In Southeast Asia, the growth outlook remains at 4.8% for 2017 and 5.0% for 2018 despite revisions for four of its economies. High growth in Malaysia, the Philippines, and Singapore is dampened somewhat by disappointing growth in Brunei Darussalam,” the report read.

Public spending and a recovery in exports will support the Philippine economy, according to the ADB.

“Robust domestic demand, particularly private consumption and investment, will continue to support economies in the region. Higher public investment boosted first quarter growth in the Philippines and Thailand, while private investment was strong in Malaysia and Vietnam. Exports rebounded in Indonesia, the Philippines, Malaysia, and Vietnam,” it added.

Sought for comment, Socioeconomic Planning Secretary Ernesto M. Pernia said: “6.5% is the lower range of our target… so that seems to be logical and you know international agencies, international organizations, private or government tend to be a bit more conservative than the government itself.”

“We are setting higher targets because we want to exert more effort to achieve the targets,” he told a press briefing in Malacañang yesterday.

Asked whether economic growth can actually beat forecasts, Mr. Pernia said: “It is quite possible. In fact, it’s probable that we can exceed that lower-end of our target.”

The economy in the first quarter recorded a slower-than-expected 6.4% expansion compared to 6.9% in the same period last year, when the economy got help from election-related spending.

ADB kept its Philippine inflation outlook unchanged at 3.5% in 2017 and 3.7% in 2018 — well within the central bank’s 2-4% target. Last year, inflation settled at 1.8%.

UPDATED OUTLOOK
Developing Asia — made up of 45 countries in the Asia-Pacific region — is expected to grow 5.9% and 5.8% this year and next, the ADB said. Those are updated forecasts from April that predicted 5.7% growth for the region this year and the next.

“Developing Asia is off to a good start this year with improved exports pushing growth prospects for the rest of 2017,” Yasuyuki Sawada, ADB’s chief economist, said in a statement. “Despite lingering uncertainties surrounding the strength of the global recovery, we feel that the region’s economies are well-placed to face potential shocks to the outlook.”

Inflation across the region is expected to remain under control, helped by well-behaved food and fuel prices, the ADB said. It cut this year’s inflation projection to 2.6% from 3%, and next year’s forecast to 3% from 3.2%.

“Consumer price inflation in the region, meanwhile, is projected to be lower from the previous estimate on the back of steady international oil and food prices despite increasing demand due to enough supplies and favorable weather conditions,” the ADB said. — Elijah Joseph C. Tubayan with reports from Reuters and AFP