ADB cuts RP growth forecast amid bright outlook for East Asia

MANILA, Philippines - The Asian Development Bank (ADB) has revised downward its growth outlook for the Philippines this year to one percent, from an earlier forecast of 1.6 percent, citing that the economy “performed even worse than expected” in the first nine months.

The ADB, however, has retained its 2010 growth outlook at 3.3 percent.

In contrast, the ADB said East Asia’s emerging economies are rebounding from the global recession faster than anticipated as it raised growth forecasts for the region.

The multinational lender said it expects East Asia to grow 4.2 percent this year and 6.8 percent in 2010, up from the bank’s earlier forecasts of 3.6 percent and 6.5 percent, respectively.

Emerging East Asia comprises 10 Southeast Asian countries plus China, Hong Kong, South Korea and Taiwan.

In a press briefing yesterday, ADB chief economist Jong-Wha Lee said in the Philippines, “conditions have not changed altogether,” adding that the last quarter of the year is not expected to significantly alter the overall economic performance.

Lee noted that while the negative impact of the two destructive typhoons in September and October will be immediately felt in the last quarter of the year, it will likely be offset by the strong remittance inflow over the same period.

He said the 3.3 percent growth rate next year could be attained by maintaining the fiscal and policy position of the government.

He likewise warned that the country must continue its economic stimulus packages while at the same time prepare for an exit strategy hinged on the entry of the private sector.

“There must be structural reforms in terms of improving revenue collection,” Lee said, pointing out that strong and steady revenue collections protect the gains of the stimulus package.

Lee also urged that Philippine government to further develop the domestic capital and debt market and avoid relying heavily on the foreign debt market.

He said there is still a lack of physical and social infrastructure that will entice domestic capital to make more investments to carry the Philippines beyond 2010.

“The Philippines must look at improving the rule of law and governance, as well as human capital. It must improve dramatically and radically the business climate and it must attract long-term investments,” the ADB economist said.

Meanwhile, the ADB expects the ASEAN bloc to grow 4.5 percent next year; emerging East Asia, 6.8 percent; and developing Asia, 6.6 percent.

Vietnam is forecast to grow five percent this year and 6.5 percent next year while Indonesia is expected to grow 4.3 percent and 5.4 percent in 2009 and 2010, respectively.

The ADB maintained its growth forecast for China at 8.2 percent this year and 8.9 percent in 2010.

“Despite the V-shaped recovery now underway, it’s essential that fiscal and monetary stimulus remain accommodative where possible to put economies on a sound footing. A key challenge for each economy will be to carefully time when best to roll back the stimulus to ensure sustained recovery but avoid both excessive inflation and hefty fiscal shortfalls,” Lee said.