ADB scales down PH GDP growth to 6% this year

The Asian Development Bank ( ADB) has cut its Philippine growth forecast from 6.3 percent to a flat six percent for this year but still expects “robust” consumer spending, investments, improved employment and higher state salaries.

The estimated Gross Domestic Product (GDP) growth is higher than its regional growth forecast of 5.7 percent this year, from actual growth of 5.9 percent in 2015.

For 2017, ADB sees domestic growth of 6.1 percent.

In its Asian Development Outlook (ADO) 2016 report, the Manila-based ADB said a strong GDP growth path will continue for the Philippines, despite lowering its forecast for the region as a whole.

ADB said government spending will likely pick up steam this year, boosted by election- related so ending. “Private consumption will be the main growth driver again in 2016, but the pace of increase could moderate. Rising employment, higher government salaries, modest inflation, and remittance inflows all point to robust consumer spending.”

The report cited plenty ongoing construction activity particularly public–private partnership (PPP) projects. About 12 PPP projects worth $4 billion are now under construction. Another $12 billion more are in the preparation stage for bidding.

ADB said while the economy continue to expand and progress in sight, there are risks to the outlook, particularly from the agriculture side, and the impact of El Niño dry weather conditions on food prices, especially if it will be harsher than anticipated.

There is also the risk of weaker-thanexpected global growth. “The outlook is subject to more uncertainty than usual as the outcome of the national elections will have an important bearing on policy,” said ADB.

In the meantime, the ADB said that while the Philippines continues to experience headwinds, including a strong El Niño weather event which has affected agriculture, as well as weak external demand, economic growth remains strong, said Richard Bolt, ADB Country Director for the Philippines.

“Sustaining this growth will require the continuation of policies that support infrastructure and human capital development, improvements to the investment climate, and better governance,” said Bolt.

In the report, ADB noted the broadbased domestic demand underpinned growth in 2015 with private consumption, which accounted for nearly 70 percent of GDP, rising by 6.2 percent on the year. “Higher employment, remittance inflows from overseas workers, and low inflation contributed to the growth in household spending.”

In 2015, domestic GDP grew by 5.8 percent, lower than consensus forecast. However, improved budget execution last year managed to increase government expenditure such as on construction. Government consumption increased by 9.4 percent, and as noted by ADB, public construction jumped by 20.6 percent.