Philippines entering ‘golden age for economic growth’ – ADB

MANILA, Philippines — Philippine economic growth is expected to further rise to 6.8 percent this year and 6.9 percent in 2019 from 6.7 percent in 2017 as the country enters “a golden age for economic growth,” the Asian Development Bank said yesterday.

During the launch of its Asian Development Outlook (ADO) 2018, the Manila-based multilateral financing bank said growth would continue to be supported by high domestic demand, rising remittances, higher employment, and increased public spending on infrastructure.

The bank also cited strengthening private investment as indicated by increased importation of capital goods and strong bank credit growth. Business optimism also remains upbeat as reflected in the central bank’s business outlook survey and the December rating upgrade by Fitch Ratings from BBB- to BBB, which is one notch above investment grade.

“Along with domestic demand, the government’s infrastructure investments will fuel the country’s growth in the next few years, supported by a sound economic policy setting,” ADB country director for the Philippines Kelly Bird said in a briefing.

The Philippines was one of the fastest-growing economies in Southeast Asia last year and is expected to sustain this performance this year.

“The Philippines’ growth in 2017 was very strong and growth was driven by robust domestic demand. The Philippines is in its golden age for economic growth. It has been growing at this pace for several years and has grown in a sound macroeconomic environment at moderate inflation. This growth is expected to be sustained throughout 2018 to 2019,” Bird said.

He said, reforms are in place to support the government’s infrastructure plan that would help sustain growth over the medium term although challenges in implementation remain.

On the supply side, the services sector is expected to continue to drive economic growth along with the manufacturing and construction industries.

“Manufacturing has picked up in recent years and is becoming broad based.” said He said while there remains external risks to the growth outlook stemming from heightened volatility in international financial markets and trade protectionism, the country’s strong external payments position can cushion the effects.

“The Philippine economic policy settings are very sound and it has  strong fiscal position,” Bird said.

As the economy picks up steam, inflation is expected to average four percent this year in line with higher global oil and food prices as well as the transitory effects of higher excise taxes brought about by the implementation of the first package of the tax reform program. By 2019, inflation is expected to average 3.9 percent.

In the medium-term, ADB said the country is challenged to sustain investments in infrastructure, stimulate the economy in lagging regions and bridge the skills gap in the workforce.

The report said the major policy challenge in the country’s growth outlook is managing the rollout of projects under the ambitious Build Build Build program which is expected to raise public infrastructure spending to 7.3 percent of gross domestic product.

ADB said there is a need to enhance government capacity, strengthen coordination between government agencies and improve technical capacity of staff.