The Asian Development Bank (ADB) has downgraded its growth forecast for the Philippines this year, yet the economy is still seen to be the fastest growing in Southeast Asia.
According to the Asian Development Outlook April 2024 report released yesterday, the Manila-based multilateral agency forecasts Philippine economic growth at six percent this year, further picking up pace at 6.2 percent in 2025.
The updated outlook for this year, however, is lower than the previous projection of 6.2 percent for 2024 in its report published last December.
“The reason for the slight downgrade of the outlook is basically the upside risks to inflation, mainly how extreme weather events affect agricultural production, the food prices, that can affect the inflation in the Philippines as food has a strong weighting of nearly 40 percent in the consumer price index in the Philippines,” Cristina Lozano, ADB Philippines principal country specialist, said in a press briefing at the ADB office in Manila yesterday.
“Also, higher shipping costs caused by disruption of the Red Sea can also drive up prices of perishables, of goods,” she added.
ADB’s outlook for 2024 is at the lower end of the government’s recently revised growth assumption for 2024 of six to seven percent, while for 2025, the multilateral agency’s estimate falls below the administration’s projection of 6.5 to 7.5 percent.
Still, based on the report, the Philippines will continue to be among the fastest growing economies in Southeast Asia this year and the next, as it is tied in the top spot with Vietnam.
“We do think that its (Philippines) a front-runner still in the region, it was top of the growth leaderboard last year, so it’s held strong,” ADB Philippines country director Pavit Ramachandran said in the same event.
ADB said strong retail trade, higher tourist arrivals and receipts and an expansion in business services will sustain growth in the services sector.
“The Philippines’ growth momentum is picking up speed, driven by the government’s efforts to improve budget execution, mobilize additional revenue, and pursue reforms to boost the investment climate,” Ramachandran said.
“Investments on large public infrastructure projects, as well as much needed social services, will boost government expenditures and bode well for the economy in the long run,” he added.
Promoting higher levels of private sector participation in the economy will be vital to further raise growth and productivity, the report said.
Meanwhile, ADB said severe weather events such as a prolonged El Niño dry weather episode and possible strong typhoons later in the year due to the La Niña phenomenon could result in inflation pressures.
A sharper slowdown in major advanced economies, heightened geopolitical tensions and higher-than-expected global commodity prices could also weigh on growth, the report said.
Inflation is expected to moderate to 3.8 percent in 2024 and 3.4 percent in 2025, falling within the two to four percent target range of the Bangko Sentral ng Pilipinas.
Decelerating global oil prices and an extension in reduced tariffs on major food items, including rice, corn and pork, until December 2024 will help contain food inflation, according to the report.
