The Asian Development Bank lowered on Wednesday its growth forecast for the Philippines this year to 5.7 percent from the 6 percent it made in April 2023, mainly taking into account the risks posed by higher inflation and global headwinds.
The bank, however, kept the GDP forecast for 2024 at 6.2 percent, with household consumption and public spending on infrastructure and social services seen contributing to the economy’s expansion.
The latest GDP assumptions were contained in its Asian Development Outlook for September 2023.
“[The] Philippine economic growth is expected to moderate this year due to inflation and global headwinds before picking up in 2024 as price pressures ease,” the report said.
ADB country director Pavit Ramachandran said the Philippines’ growth story remained strong despite an expected moderation in 2023.
He said public investment and private spending fueled by low unemployment rate, sustained increase in remittances from Filipinos overseas, and buoyant services including tourism will support growth.
“The government’s large infrastructure projects should further stimulate consumption, boost jobs, and spur more investment,” Ramachandran said.
Downside risks to the outlook are likely to come from global headwinds such as geopolitical tensions and a sharper-than-expected slowdown in major advanced economies.
The government met its target spending on infrastructure of 5.3 percent of GDP in the first half of the year and is expected to maintain this level of investment with several big-ticket projects underway.
ADB is helping finance some of these major, transformative projects such as the Malolos-Clark Railway Project; South Commuter Railway Project; Improving Growth Corridors in Mindanao Road Sector Project; and the Integrated Flood Resilience and Adaptation Project-Phase 1 which was approved last week.
Higher tourism-related receipts, sustained remittances, and strong service exports, particularly from business process outsourcing, will help lift the current account and offset weak merchandise exports, the report said.
Forecasts for inflation are maintained at an average of 6.2 percent in
2023 and 4.0 percent in 2024
However, possible severe weather disturbances, including the El Niño dry weather phenomenon, pressures from elevated global commodity prices, and second round effects from higher transport fares and minimum wage hikes could slow the pace of inflation easing.
The Philippine economy slowed to 4.3 percent in the second quarter from 7.5 percent a year ago, amid the uncertain global environment highlighted by elevated inflation and higher interest rates.
Data showed this was the slowest GDP growth posted since the -3.8 percent in the first quarter of 2021. This was also significantly slower than the 6.4 percent a quarter ago, bringing the first-half average to 5.3 percent, lower than the target range of 6 to 7 percent.