ADB slashes growth forecasts for Philippine economy as inflation bites
MANILA, Philippines (Update 3, 3:38 p.m.) — The Asian Development Bank on Wednesday downwardly revised its growth outlook on the Philippine economy following the slower than expected gross domestic product expansion in the first half of the year, and amid high inflation.
In an update of its annual economic publication, the Manila-based multilateral lender said it expects the Philippine economy to grow 6.4 percent in 2018, before picking up to 6.7 percent next year. If realized, this would fall below the government’s 7-8 percent goal.
ADB’s latest growth forecasts on the Philippine economy were lower than its previous estimates of 6.8 percent for this year and 6.9 percent next. The institution's revised 2018 growth projection for the country faced the largest downward adjustment among Southeast Asian economies.
But ADB's updated outlook on the Philippines was better than its growth projections of 6.0 percent and 5.1 percent on Developing Asia for 2018 and 2019, respectively, as the escalating US-China trade war tests the region’s resilience.
'Moderation in agri output and exports, higher inflation'
The revised outlook for the Philippines "reflects a moderation in agricultural output and exports, as well as higher inflation and continued global monetary tightening," the Bank said.
READ: Philippine trade gap widens in July amid lackluster export growth | Government to miss agriculture growth target for 2018
"Inflationary pressures are expected to taper off next year as tighter domestic monetary policy begins to take effect," it added.
Actual GDP—or the value of all finished goods and services produced in the country—sharply eased to 6.0 percent in the second quarter, the slowest pace since the similar 6.0-percent expansion recorded in the third quarter of 2015.
In the first half of 2018, the economy grew 6.3 percent.
Philippine policymakers have been concerned about spiralling inflation, which rose to a nine-year high of 6.4 percent in August. Some analysts expect economic growth to continue to decelerate over the second semester of the year as tighter monetary policy and higher inflation weigh on consumer spending, which accounts for about seven-tenths of the Philippine economy.
READ: Filipinos tighten belts as inflation jumps to new 9-year high in August
“The Philippines’ growth outlook remains stable despite moderating slightly in the first half of the year, as the country’s economic fundamentals are strong,” said Kelly Bird, ADB country director for the Philippines.
“We’re expecting growth to slowly pick up as public investment in infrastructure and social sectors accelerate and key economic sectors continue to perform solidly,” Bird added.
For its part, Malacañang said it took note of ADB's assessment on the economy.
“We expected this slowdown vis-a-vis our growth target for the year, given that certain policy decision... contributed to the deceleration,” the Palace said in a statement.
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