ADB: Political noise ‘worrisome’
…but not enough to change Philippine growth outlook
YOKOHAMA, Japan — Close to a year of political controversies into the administration of President Rodrigo R. Duterte has not been enough to derail the Philippines’ relatively bright growth prospects, the Asian Development Bank’s (ADB) chief economist said in a briefing here yesterday.
ADB’s latest check on three drivers of the Philippine economy — household consumption, public and private investments as well as external demand — showed that two of them, domestic consumption and investment, “are sound to support a quite robust growth rate…”, ADB Chief Economist Yasuyuki Sawada told visiting journalists at the PACIFICO Yokohama conference complex ahead of the 50th meeting of the regional lender’s Board of Governors.
The Asian Development Outlook 2017 which ADB released last month showed projections for the Philippine gross domestic product (GDP) growth at 6.4% and 6.6% for this year and 2018, respectively, from 2016’s upwardly revised 6.9% actual pace. The Philippines’ projected performance compares to expectations of 4.8% and 5.0% for Southeast Asia in the same respective years from 4.7% in 2016, as well as to 5.7% for this year and next for all of ADB’s 45 member economies from last year’s 5.8% average.
ADB’s projections compare to the government’s own targets of 6.5-7.5% this year and 7-8% in 2018.
“So I think the potential risk from domestic political turbulence is a little bit worrisome, but in spite of this situation our growth rate forecast will continue, and behind this is a rather robust Philippine economy with sound domestic consumption and very active domestic investment,” Mr. Sawada said.
“Some people talk about domestic political instability, but I think the security situation seems to be improved in general,” he later told BusinessWorld.
His views coincide with those of some credit raters that have kept their optimistic view of the Philippine economy but have lately flagged risk to the Duterte administration’s reforms from an overemphasis on politics and crime, particularly actions against select members of the political opposition and the bloody war on the narcotics trade.
Merchandise exports, on the other hand, have constantly been cited by economists as a growth damper, although the Nomura Group last month cited a recovery in outbound sales of goods that prompted it to upgrade its GDP growth projection to 6.7% this year from 6.3% previously, and to 6.8% in 2018 from a 6.5% previous forecast.
Merchandise exports are expected to contribute to first-quarter GDP growth
— which Socioeconomic Planning Secretary Ernesto M. Pernia has estimated at seven percent and which the government is scheduled to report on May 18 — as they increased in value by 17.4% to $9.973 billion as of February from 2016’s first two months. The Development Budget Coordination Committee, which sets national budget assumptions, put the full-year 2017 projection for increase in goods shipments at two percent.
That wasn’t the case last year, when outbound Philippine shipments fell 2.42% to an upwardly revised $ 57.406 billion from 2015’s $ 58.827 billion against a three percent growth target for 2016.
‘THE THREE UNCERTAINTIES’
Mr. Sawada said he was watching external risks more, not only for the Philippines but also for the entire Asia and the Pacific.
He particularly cited “the three uncertainties” the region faces.
The first, Mr. Sawada said, is a “sharper-than-expected” interest rate normalization in the United States “and other monetary authorities respond”. He said ADB is looking at “a baseline scenario” of three rate hikes by the US Federal Reserve this year — including the one just last March that was the third since December 2015 and 2016 after nearly a decade of near-zero rates — and four next year.
The second risk is a change in US trade policy to one that is protectionist. “We don’t know yet the concrete final policy, but this will generate uncertainty in investment and consumption sentiment,” he added.
Third is the possible persistence of a weak oil and energy market “that will be good for oil and energy importers but potentially harmful for resource exporters.” —