ADB still sees 6% growth for PH

THE Asian Development Bank (ADB) has maintained its Philippine economic growth outlook of 6 percent for this year, citing stronger domestic investment and consumption as key drivers of expansion.

“The economic recovery is expected to gain traction this year and next, underpinned by strengthening domestic investment and consumption. GDP (gross domestic product) growth is forecast at 6 percent in 2022 and 6.3 percent in 2023,” ADB underscored in its Asian Development Outlook 2022 report released on Wednesday.

The forecasts for 2022 and 2023 are lower than the 7- to 9-percent growth objective set by the interagency Development Budget Coordination Committee for this year and the next, but higher than the 5.6-percent real GDP growth in 2021.

Government steps to unlock the economy, lift mobility limitations, increase Covid-19 immunization and relax international travel restrictions, the Manila-based multilateral lender stressed, will help the services sector which accounts for 60 percent of GDP.

It said increased public investment in major, high-priority infrastructure projects will continue to stimulate growth, with the government planning to keep infrastructure spending at over 5.0 percent of GDP this year or up from 5.8 percent in 2021.

“Election-related spending ahead of national elections in May will provide a modest lift to aggregate demand,” the ADB added.

It said that when the economy improves, revenue would increase and the government’s choice to keep excise taxes on petroleum items in place, despite calls to suspend them to reduce price spikes at the pump, will help to retain revenue.

Private investment indicators are also favorable, the ADB continued, because major investment climate reforms, such as the Foreign Investment Act, Public Service Act, Retail Trade Liberalization Act, Corporate Recovery and Tax Incentives for Enterprises Law, as well as the launch of the Anti-Red Tape Authority’s Central Business Portal and the rollout of the Philippine Identification System, have been approved.

It expects the country’s inflation rate to pick up to 4.2 percent this year, well beyond the government’s 2- to 4-percent target, owing to higher global oil and commodities costs.

The current account deficit is expected to widen to 3.2 percent of GDP this year and narrow to 3.1 percent in 2023, the ADB said, as faster economic development raises imports, while higher oil prices this year will also drive up import expenses.

“Growth in merchandise exports will be moderate compared with imports. Rising remittances and services exports, including business processing outsourcing and tourism receipts, will help trim the current account deficit,” it emphasized.

The greatest downside risks to the projection, the ADB cautioned, are the unpredictability of global events prompted by the Russian invasion of Ukraine.

It warned that there is a strong danger that inflation may rise as a result of second-round effects such as tightened lending markets and increased interest rates.

“Heightened and extended geopolitical tensions will dampen global growth,” the ADB continued, “including in advanced economies, particularly Europe and the United States, which are among the Philippines’ key export markets.”

Policies to increase the resilience of micro-, small- and medium-sized firms, which are critical to the country’s economic recovery, should be strengthened in the future, it added, to support the sector’s digital transformation, business innovation and skills development.