The Asian Development Bank on Tuesday upgraded its growth forecast for the Philippines this year and next, on strong performance in the first half and recovery in exports.
ADB said in an an update of its flagship annual economic publication Asian Development Outlook 2017 that growth projections were raised for Malaysia, the Philippines and Singapore on surprisingly strong performances in the first half with broad revisions for domestic and external demand.
It revised upward the 2017 growth forecast for the Philippines to 6.5 percent from 6.4 percent, while the 2018 forecast was adjusted to 6.7 percent from 6.6 percent.
“The upgrade for the Philippines reflects stronger exports, rising remittances, higher investments and continued credit expansion,” ADB said
The gross domestic product of the Philippines grew 6.5 percent in the second quarter and 6.4 percent in the first half.
Southeast Asia as a whole is expected to grow 5 percent in 2017 and 5.1 percent in 2018.
Meanwhile, Developing Asia is forecast to expand 5.9 percent this year, stronger than an earlier estimate of 5.7 percent. Growth in 2018 is seen at 5.8 percent.
“Growth prospects for developing Asia are looking up, bolstered by a revival in world trade and strong momentum in the PRC,” said ADB chief economist Yasuyuki Sawada.
“Countries in developing Asia should take advantage of favorable short-term economic prospects to implement productivity-enhancing reforms, invest in badly needed infrastructure, and maintain sound macroeconomic management to help increase their long-term growth potential,” said Sawada.
Growth across developing Asia is buoyed by a revival in trade. The dollar value of the region’s exports surged by 11 percent in the first five months of 2017 over the same period in the previous year, and the value of its imports rose by 17 percent.
The pickup follows two consecutive years of contracting export values caused by falling commodity prices and subdued external demand for manufactures. Excluding the PRC, the eight largest regional developing economies saw real manufacturing exports rebound.
Meanwhile, the two nations received the largest upgrades for this year among major economies in the Asian Development Bank’s latest outlook. Meanwhile, India received the steepest downgrade.
The global trade recovery is helping boost exports in Hong Kong and Malaysia while demonetization and the implementation of the new goods and services tax regime in India have dented consumer spending and business investment. India’s economy is seen recovering in fiscal year 2018 with expansion forecast at 7.4 percent.
As a whole, the outlook for developing Asia is robust even as risks remain including sudden changes in US monetary policy and geopolitical or weather-related disasters. The unwinding of stimulus in the US “may drain capital from the region, which would challenge Asia’s financial stability,” according to the report.
Higher bond yields could push up long-term financing costs at the same time that a strengthening U.S. dollar would prompt more capital outflows from the region. Government officials should monitor debt levels and asset prices while strengthening their financial positions, the ADB advised.
In economies like Indonesia, Malaysia, Thailand, and Taiwan, there is room for accomodative policy, the ADB said. In the Philippines and South Korea, the case for stimulus may be less clear because the growth upturn is protracted and price pressures are intensifying.
The region should embark more aggressively on building infrastructure, including through public-private partnerships, ADB said. More than half of the economies in developing Asia lack dedicated PPP units. With Bloomberg
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