ADB: PH to rebound in 2012 with 4.8% growth

MANILA, Philippines – After a lackluster 3.7% economic growth in 2011, the Philippines would bounce back this 2012 with a 4.8% growth, the Manila-based Asian Development Bank (ADB) projected.

In its Asian Development Outlook 2012 released Wednesday, April 11, the ADB said increased public spending, investment, and private consumption will lift growth in the Philippines over the next two years.

In 2013, GDP growth is projected to quicken to about 5% on expectations of “a more favorable external environment and gathering momentum in infrastructure investment.”

However, it also noted that “long-standing structural weaknesses remain an obstacle to reaching the government’s 7% to 8% growth target.”

“Remittances and lower inflation will sustain private consumption, and strong business sentiment will continue to support private investment. A pickup in public investment and accommodative monetary policy will also aid the Philippine economy,” said Neeraj Jain, ADB’s Country Director for the Philippines.

“However, issues like poor infrastructure and weak governance must be tackled if the country’s economic gains are to benefit all,” he added.

“To overcome these obstacles, policymakers must accelerate efforts to improve the country’s infrastructure, as well as the governance and business environment, ADO 2012 says. This could include policy reforms to create the right incentives and selectively targeted government support to boost output of value-added goods, and to increase the number of high-productivity, high-wage jobs,” the report said.

These are the other highlights of the report:

• Forecasts for 2012 and 2013 assume that the government will raise spending, follow through on its commitment to improve the business environment, and carry out some of the planned public–private partnerships, which include airports, highways, and water supply operations (they were delayed in 2011)
• An increase in household consumption, fueled by a rise in remittances from overseas workers and accommodative monetary policy will also underpin growth
• Sovereign rating upgrades and better business sentiment are expected to boost investment
• Exports growth likely to improve with a modest rebound of about 5% in merchandise exports seen in 2012, on a pickup in economic growth in the US and Japan (which together take about a third of exports) and solid growth in Southeast Asia (about a sixth). Weakness in Europe and moderating growth in the People’s Republic of China (each absorbing about one-eighth of exports) will temper export growth.
• Imports will likely rise faster than exports, given robust consumer demand and the expected lift in investment.
• The current account surplus is forecast at 2.1% of GDP, after taking into account increases in remittances and income from BPO
• Services will be the main growth contributor as the country’s booming business process outsourcing industry keeps expanding
• Inflation in 2012 will dip slightly to an estimated 3.7% on the assumption of broadly stable global commodity prices
• The peso is seen little changed against the US dollar
• New sizable increase in new revenue is needed if government is to meet its goal of trimming the budget deficit to 2.0% of GDP next year, according to ADB Chief Economist Changyong Rhee. In addition to efforts on tax administration, the authorities are seeking higher tax revenue from alcohol and tobacco products and an overhaul of incentives to attract direct investment.
• Other drags on the economy are the slow progress on key Millennium Development Goals, rising income inequality, an over-reliance on electronics exports and remittances, and industrial stagnation

– Rappler.com