MANILA, Philippines — The Asian Development Bank said the Philippines would feel the pinch of the global crisis and growth would decelerate this year, but noted that the country would be in a much better position than most of its neighbors to cushion the impact of the turmoil.
In its Asian Development Outlook report, released Tuesday, the ADB said the Philippine economy would grow 2.5 percent this year, compared with 4.6 percent in 2008 and 7.2 percent in 2007.
“The Philippines is not decoupled from the external economy, and we expect it to slow down this year,” Thomas Crouch, ADB director general for Southeast Asia, said, but he stressed that the growth outlook for the Philippines this year was higher than the average growth forecast of 0.7 percent for the Southeast Asian region.
The economies of Thailand, Singapore, Malaysia and Cambodia are projected to contract this year, the ADB said, with that of Singapore seen to post the biggest decline of 5 percent.
The ADB said the declining consumption in advanced economies would drag down export income of countries in the region, while the financial meltdown in the United States and Europe is likely to result in uncertainty that would force businessmen to pull out investments even from emerging economies.
In the case of the Philippines, the ADB said foreign direct and portfolio investments were expected to be weak. Consumption would also slow down this year as remittances from overseas Filipino workers finally end the growth trend.
“Consumer spending, though benefiting from the downtrend in inflation, is projected to grow just 3 percent. That is because remittance inflows will likely flatten in US dollar terms as labor markets weaken worldwide,” Crouch said. Remittances grew 13.7 percent last year to $16.4 billion.
The ADB also projected that the Philippines’ export sector would suffer from the dwindling of global demand, projecting export income to drop 15 percent this year, faster than last year’s 2.6-percent decline to $49 billion.
But what would make the Philippines suffer less than its neighbors this year, the ADB said, is the accommodative fiscal and monetary policies of the government, relative strength of the banking sector and continued growth — albeit at a slower pace — in consumption.
“The Philippines did the right things over the past years,” Crouch said, referring to fiscal measures that reduced the national government’s budget deficit to P68.4 billion in 2008 from more than P200 billion at the start of this decade.
Crouch also noted the drop in the Philippine government’s debt-to-GDP (gross domestic product) to only 56 percent last year from 78 percent in 2004.
The improved fiscal situation would allow the government to increase spending on social services and infrastructure projects this year without worrying about going back to an unmanageable deficit and debt levels, he said.
Crouch also said the central bank’s moves to cut its key policy rates — by a total 125 basis points since December — and to implement other monetary policy easing measures would also support decent growth this year. –Michelle Remo, Philippine Daily Inquirer
with editing by INQUIRER.net