Phl growth forecast highest among Asean members

MANILA, Philippines - The Philippine economy will continue to expand next year, but the growth outlook has been slightly lowered as reduced government spending, higher inflation, and monetary tightening are expected to dampen activity, the Asian Development Bank (ADB) said in a report.

In its updated Asian Development Outlook 2014, the Manila-based lender cut its growth forecast for the country’s gross domestic product (GDP) to 6.2 percent this year from the previous forecast of 6.4 percent.

For 2015, the economy is seen growing by 6.4 percent, lower compared with the previous forecast of 6.7 percent.

Comparative statistics show the country still has the highest GDP growth forecast among the Association of Southeast Asian Nations-6 (ASEAN-6) member countries for this year and the next.

The slight deceleration comes with the slowdown in 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 six percent on the back of export recovery and private consumption and investment expansion. Growth prospects for the rest of the year and the next 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 $3.6 billion – and almost doubled in 2013 to $3.8 billion from an annual average of about $2 billion in 2008-2012.

But despite strong GDP growth averaging 6.3 percent since 2010, job generation is insufficient, said the report.

“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 eight 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 said.

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 expected at 4.6 percent in 2014 from the previous forecast of five-percent 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 six 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 5.7 percent from the April forecast of 5.1 percent and to 5.3 percent from the April forecast of five percent in 2015.