ADB raises Philippines' growth prospects despite rising inflation
MANILA, Philippines — The Asian Development Bank upwardly revised its growth forecast for the Philippines this year following a forecast-beating economic expansion in the first half, but growth next year could come under pressure from rate hikes meant to control painfully high inflation.
In an update to its flagship “Asian Development Outlook” report released Wednesday, the Manila-based lender said gross domestic product will likely grow 6.5% this year, better than 6.0% projection it made 5 months ago.
If realized, the ADB’s latest forecast would hit the low-end of the Marcos Jr. administration’s watered-down goal of 6.5-7.5% growth this year. ADB explained that improving domestic demand lifted the economy’s recovery trajectory.
Face-to-face classes in public schools returned last month, after the national government’s hurried push for a return to normalcy after two years of online classes. At the same time, tourism is slowly regaining solid footing after two years of depressed activity as pandemic restrictions were eased early in the second quarter.
Meanwhile, the Marcos Jr. administration is batting for lax mask-wearing guidelines outdoors.
“Domestic economic activity is expected to remain firm on eased COVID-19 mobility restrictions, higher vaccination and booster shot coverage, and improving consumer confidence,” the Bank said.
ADB’s new projections showed the Philippines and Vietnam would grow the fastest this year in Southeast Asia, which is expected to expand 5.1% on average.
The Philippines is also forecast to beat Developing Asia’s projected average growth rate of 4.3%, which was lower compared to the old prediction of 5.2% expansion amid increased monetary tightening by central banks, fallout from the protracted Russian invasion of Ukraine, and recurrent COVID-19 lockdowns in China — the world’s second largest economy.
At home, ADB said the Bangko Sentral ng Pilipinas’ aggressive rate hikes to fight stubbornly high inflation would start to bite the economy next year. Growth forecast for 2023 was kept at 6.3%, as higher borrowing costs are expected to crimp consumption and investment.
ADB projects Philippine inflation to churn at a faster pace of 5.3% in 2022, higher than the previous prediction of 4.2%. If realized, the government would miss its 2-4% annual inflation target this year, which ADB attributed to rising global commodity prices and tighter supply conditions within the domestic economy.
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