ADB retains Philippine growth forecasts, but sees elevated inflation in 2018
MANILA, Philippines — The Asian Development Bank on Wednesday retained its growth forecasts on the Philippine economy, adding that Asia’s developing economies will weather external headwinds from trade friction between the US and China.
However, the Manila-based multilateral lender still expects inflation to remain elevated this year.
In a supplement to its Asian Development Outlook 2018 Update report, the ADB said the Philippine economy will likely grow 6.4 percent in 2018 and 6.7 percent in 2019, unchanged from its previous estimates.
If realized, the ADB’s projections would fall below the low-end of the government’s downwardly revised 6.5-6.9 percent goal for this year and 7-8 percent growth target for 2019 until 2022.
The ADB last September trimmed its Philippine growth forecasts for this year and next following the slower-than-expected gross domestic product expansion in the first half of the year and amid red-hot inflation.
Soaring prices and surging borrowing costs have already weighed on consumer spending, which has traditionally been the driving force behind growth in the Philippines, and crimped economic expansion to a three-year low of 6.1 percent in the third quarter.
But some economists said government spending should provide some support to the economy as the Duterte administration’s massive public infrastructure program progresses.
Despite the Duterte administration’s measures that sought to address food supply bottlenecks and the aggressive monetary policy tightening by the central bank, the ADB upwardly revised its Philippine inflation outlook to 5.3 percent this year from its previous estimate of 5 percent.
The lender’s inflation forecast for 2019 was steady at 4 percent, matching the upper-end of the state’s 2-4 percent target range.
“Food prices rose significantly owing to weak agricultural output, and high global oil prices early in the year and new excise taxes contributed to inflation,” the ADB said.
“The recent buildup in inflationary pressure should moderate next year... Tight monetary policy will kick in following a cumulative rate hike of 175 basis points implemented from May to November 2018,” it added.
Filipino households reeling from soaring prices since the beginning of the year finally got their much-awaited reprieve in November, which saw a four-month low inflation rate of 6 percent on the back of slower price increments for food and tumbling oil prices.
In the first 11 months of 2018, inflation averaged 5.2 percent, still above the BSP’s target range.
READ: Inflation cools down for the first time in 2018 in November
Asia's growth outlook steady
In the same updated report, the ADB said growth forecasts for Developing Asia — 45 of the ADB's 67 members — remain unchanged at 6 percent for 2018 and 5.8 percent for 2019 despite the US-China trade war’s threats to global economy.
“The truce on trade tariffs agreed by the United States and the People’s Republic of China is very welcome but the unresolved conflict remains the main downside risk to economic prospects in the region,” said ADB chief economist Yasuyuki Sawada.
“That said, we are keeping our forecasts for the region’s growth unchanged for this year with some of the biggest economies continuing to hold up well,” he added.
READ: US, China agree to trade war ceasefire, more talks | US wants 'concrete' trade action from China within 90 days
— Ian Nicolas Cigaral
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