The Asian Development Bank (ADB) has maintained its growth forecast for the Philippines, with the economy seen to post the strongest expansion among its Southeast Asian neighbors for this year and next.
According to the July edition of the ADB’s Asian Development Outlook, the Philippines is seen to post a growth of six percent in 2023 and 6.2 percent in 2024, unchanged from those made by the multilateral agency in its April report.
“Robust investment and private consumption drove growth by 6.4 percent year on year in Q1 2023, supported by rising employment, expanding production and retail sales, and brisk private and public construction. Net exports weighed on GDP. Merchandise export declined, partly offset by expansion in service exports. Tourism bounced back, and growth remained strong for business process outsourcing and information services,” the ADB said.
The Philippines is expected to grow faster than Vietnam this year, the outlook for which has been downgraded by the ADB to 5.8 percent from its April projection of 6.5 percent.
The country is also seen to outperform Indonesia with growth projected at 4.8 percent for 2023; Malaysia, 4.7 percent; Thailand, 3.5 percent; and Singapore, 1.5 percent.
With the downgrades made in the projections for Vietnam and Singapore (from April’s two percent), the outlook for the Southeast Asian region was revised to 4.6 percent for this year from the previous estimate of 4.7 percent.
For next year, the ADB still sees the Philippines as one of the top performers in the Southeast Asian region in terms of growth. Vietnam is expected to record a similar expansion rate of 6.2 percent for 2024, however, this has been downgraded from the April projection of 6.8 percent.
Indonesia is estimated to post a growth of five percent in 2024; Malaysia, 4.9 percent; Thailand, 3.7 percent and; Singapore, 3 percent bringing the estimated average growth for the region next year to 4.9 percent.
ADB’s growth projection for the Philippines for this year, however, is at the lower end of the Development Budget Coordination Committee’s economic growth assumption of six to seven percent for 2023, while its 2024 estimate falls below the government’s 6.5 to eight percent outlook for next year.
The ADB kept its inflation outlook for the Philippines at 6.2 percent for 2023 and four percent for 2024.
Meanwhile, First Metro Investments Corp. (FMIC) said it expects the economy to grow by 6.1 percent this year.
“We continue to be optimistic and we believe that the GDP will expand by 6.1 percent this year, as we expect strong domestic demand to remain a key driver of growth. This positive momentum will be supported by prudent fiscal management, heightened infrastructure spending, and enhanced business and consumer confidence,” said Jose Patricio Dumlao, FMIC president.
Victor Abola, University of Asia and the Pacific economist, however, pegged the second quarter growth to just 5.6 percent.
FMIC expects the continued resilience of the economy as employment in April and May grew more than 5 percent, and unemployment continues to fall.
FMIC said inflation will continue to slow down, expected to hit the Bangko Sentral ng Pilipinas’ (BSP) target of below 4 percent by the end of the year as crude oil and food prices decline.
“OFW remittances, which grew by 2.8 percent to $2.49 billion in May, will likely increase by 3-5 percent this year,” it added.
The peso is seen to continue trading between 56 and 58 vis-a-vis the dollar for the rest of the year.
“Given the pause on BSP rate hikes, interest rates are projected to fall by about 10 to 20 basis points across the yield curve,” FMIC said.
Daniel Camacho, FMIC group head for investment banking said interest rates in the debt market are expected to also decline in line with the inflation deceleration.
Cristina Ulang, FMIC head of research, said the Philippine Stock Exchange index may close the year at 7,300-7,500 as the current share prices offer a “favorable buying opportunity” in preparation for a significant recovery towards year-end and the first quarter of next year. Ruelle Castro
