News Analysis: ADB lowers growth forecast for Phl, other Asian economies

MANILA, Philippines (Xinhua) - The Manila-based Asian Development Bank (ADB) was the latest among multilateral financial institutions to lower its growth forecast for the Philippines and other Asian countries in 2014 with the fallout from the super- typhoon Haiyan (local name: Yolanda) still being felt this year.  

In a supplement report to its Asian Development Outlook for 2014 released over the weekend, the ADB said that the Association of Southeast Asian Nations (Asean)'s region composed of Indonesia, Malaysia, the Philippines, Singapore and Thailand, would grow by 4. 8 percent in 2014.

This was slower than the ADB's previous forecast of a 4.9 percent expansion this year. Earlier, the ADB said that economic growth in the region would pick up to 5.2 percent in 2014.

"Southeast Asia's growth forecast is tempered. Typhoon damage will moderate rapid growth in the Philippines before major reconstruction gets under way," the ADB said.

The ADB did not release the updated forecasts for individual countries in its supplement report.

But early this year, it said that the Philippines was expected to grow by 6.4 percent to 6.7 percent this year and 6.7 percent in 2015. The overall slowdown in regional growth could pull down growth in the Philippines.

The ADB said that growth in Southeast Asia softened in the first half of 2014 largely because of country-specific factors in Indonesia, Thailand, and Vietnam.

The multilateral lending institution has said that the revised outlook for the sub-region's five largest economies, which is 4.8 percent in 2014, would drag the sub-regional forecast to 4.7 percent, but should rebound in 2015 to 5.6 percent across Southeast Asia.

The ADB supplement report also maintained its earlier growth forecast for China. It said that China, the world's second largest economy, is set to post gross domestic product (GDP) growth of 7.5 percent in 2014, and 7.4 percent in 2015. China's economy expanded by 7.7 percent in 2013, the same rate in 2012.

Earlier, the World Bank also slightly lowered its 2014 economic growth forecast for the Philippines, as the effects of super typhoon "Yolanda" are expected to continue dampening growth.

The World Bank said the Philippines' GDP will grow by 6.6 percent, slightly lower than its pre-Yolanda forecast of 6.7 percent. This is at the lower end of the government's target of 6. 5 percent to 7.5 percent this year.

But the World Bank also raised its 2015 GDP forecast for the Philippines to 6.9 percent, from an earlier forecast of 6.8 percent.

"(Growth) depend on the speed and scope of the reconstruction program. The key challenge of the reconstruction process is to develop and enforce explicit standards for 'building back better' - for safe and resilient buildings and infrastructure... An action- oriented, coalition-supported program on generating more and better jobs is needed," the World Bank said.

The Zurich-based financial group Credit Suisse has also tempered its 2014 economic growth forecast for the Philippines on expectations of a "subdued" second quarter performance as suggested by disappointing export receipts in April.

In a research note dated June 10, Singapore-based CS economist Michael Wan said his company had cut its full-year GDP forecast for the Philippines this year to 6.2 percent from 7 percent, reflecting the likely weakness in exports.

The weaker-than-expected export receipts in April, Wan said, could be partly due to the increase in Japan's value added tax ( VAT).

"Nonetheless, domestic demand (investment and private consumption) should continue to be robust, reflecting in part the lagged impact of loose monetary policy last year," Wan said.

In April, Philippine exports rose by a meager 0.8 percent year- on-year versus the consensus year-on-year growth outlook of 10 percent for the period and CS' estimate of 8 percent.

The Hong Kong and Shanghai Banking Corporation (HSBC) is keeping its 2014 economic growth forecast for the Philippines which is already the lowest among multilateral lending institutions.  

The HSBC said that the Philippines will grow by 5.9 percent this year because "optimism on the Philippine growth remains high despite a decelerated economic figure."

"We maintain our 2014 growth forecast of 5.9 percent, a deceleration from 7.2 percent in 2013. Despite slowing growth, supply-side constraints will push headline inflation higher in the third-quarter of 2014," the HSBC said.

While the Philippine economy grew by 7.2 percent in 2013, the GDP growth in the first quarter was only 5.7 percent year-on-year.