ADB maintains RP growth forecast at 4.7% this year

The Asian Development Bank (ADB) maintained its economic growth forecast for the Philippines at 4.7 percent for 2005, but cut it from five percent to 4.8 percent for 2006.

Despite pressures from record high oil prices, the Philippine government has stuck to its 5.3-percent growth target in gross domestic product (GDP) this year, but admitted it would likely revise next year’s target down to 6.3 percent.

In the Southeast Asian region, the ADB is forecasting an average growth of five percent this year and 5.4 percent in 2006.

For the East Asia region, growth is seen at 6.6 percent for both 2005 and 2006, powered by strong growth momentum in the People’s Republic of China.

The ADB said a variety of factors have dimmed the outlook this year in Southeast Asia, including poor harvests and high oil prices, particularly hitting the Philippines and Thailand. It also factored in a slowdown in the global electronics sector affecting Malaysia and the Philippines.

"These negative developments are to some degree offset by continuing robust growth in Vietnam and an improving investment climate in Indonesia. But overall, 2005 growth in Southeast Asia has been revised down to five percent from 5.4 percent," the ADB said.

As a large net oil importer, Asia is particularly vulnerable to high oil prices. Even net oil exporters such as Kazakhstan, Papua New Guinea and Vietnam also face challenges when oil prices soar. Across Asia, countries need to adjust to the possibility that high oil prices could linger for some time.

"Oil prices have risen by almost 75 percent since the beginning of 2005. Across the region, signs of strain are beginning to show. Failure to adjust could put prospects at risk," Ifzal Ali, ADB chief economist, said.

Other risks include the possibility that growth might slow in the US as well as threats of virulent diseases and terrorist attacks.

For poor countries with large external debts, smaller reserves and limited borrowing capacity, higher import fuel bills could present financing difficulties.