ADB cuts RP’s 2-year growth forecast

MANILA, Philippines – The Asian Development Bank (ADB) has trimmed down its growth forecast for the Philippines this year to 1.6 percent from an earlier estimate of 2.5 percent due to a sluggish economic performance in the first semester.

For 2010, the ADB said the country would stage a recovery but the pace of expansion will likewise slow to 3.3 percent from the previous forecast of 3.5 percent.

The Philippine government has earlier downscaled its official growth target this year to a range of 0.8 percent to 1.8 percent due to weak imports and exports and slower domestic consumption, typically the economy’s growth drivers.

In its updated Asian Development Outlook released yesterday, the Manila-based multilateral lender said the Philippines managed to post a modest one percent growth in gross domestic product (GDP) in the first six months, owing to sustained remittance inflows and lower inflation.

“The Philippines is a resilient country with strong private consumption and remittances that would propel a stronger second semester,” ADB Philippine country director Neeraj Jain said

But the ADB said these growth drivers were offset by “a sharper than anticipated slowdown in private consumption, coupled with a slump in exports and weakness in fixed investment,” which cut the GDP growth rate more than expected.

Private consumption growth pulled back to 1.8 percent in the first six months from the 4.6 percent recorded in the same period last year. Exports and imports, meanwhile, continued to post double-digit declines in the past months.

“Full-year growth will be lower than forecast in March,” the ADB said.

Next year, the ADB said it sees the Philippine economy posting a higher growth of 3.3 percent, to be driven mainly by better business sentiment, election spending, and a smooth transition in government.

In March, the ADB said the economy would likely expand by 2.5 percent this year due to weakened global demand for the country’s goods and services. At that time, the multilateral lender’s projection is lower than the government’s estimate of at least 3.7 percent GDP growth.

By July, the lender said it may lower its growth forecast for the Philippines, but stressed that the country is unlikely to enter into a recession this year.

The government has lowered its growth projections as the economy posted a dismal 0.6 percent growth for the first three months of the year.

In the second quarter, however, the Philippines showed a 1.5 percent growth, which brought the country’s first half GDP to one percent.

This has led the country’s economic managers to consider revising yet again their growth projections for the country. Early this month, National Economic and Development Authority chief Augusto Santos said that they are working on a possible upward adjustment on the country’s growth targets for 2009. –Ted P.Torres (The Philippine Star)