Growth outlook retained

THE PHILIPPINES will likely recover from last year’s sluggish growth amid increased public spending, investments and private consumption but “longstanding structural weaknesses” remain hurdles to achieving inclusive growth, the Asian Development Bank (ADB) yesterday said.

In its latest Asian Development Outlook, the Manila-based multilateral institution maintained its December projection of 4.8% gross domestic product (GDP) growth for 2012 — up from 2011’s 3.7% result and lower than the government’s 5-6% target.

For 2013, the ADB expects economic growth to pick up to 5%.

“Remittances and lower inflation will sustain private consumption, and strong business confidence will continue to support private investment. A pickup in public investment and accomodative monetary policy will also aid the Philippine economy,” ADB country director Neeraj Jain said.

ADB chief country economist Norio Usui concurred, noting that remittances are continuing to push private consumption. The central bank recorded a 7.2% rise in remittances last year but expects growth to slow to 5% this year, an outlook shared by the ADB.

The ADB said lower prices would also encourage consumer spending, noting that inflation will likely ease to 3.7% in 2012 — within the government’s 3-5% target — and 4.1% next year. The rise in consumer prices averaged 4.4% last year.

The ADB, however, urged the government to address issues of inequality, over-reliance on exports and remittances, and industrial stagnation. “The failure of the industry to move up the value chain because of weak infrastructure and a cumbersome environment has limited the creation of higher paying jobs needed to reduce poverty,” in noted.

It added that the ramping up of highly-needed infrastructure investments should be matched by increased revenues. “[T]he government will need a sizable increase in new revenue if it is to meet its goals of trimming the budget deficit to 2% of GDP next year,” ADB chief economist Changyong Rhee said.

Aside from internal threats, a slower global economy could affect the country’s growth this year, the ADB said, noting that uncertainty in Europe and China may temper an exports rebound. The ADB noted that the country was more vulnerable to external headwinds given its export-driven economy.

“Weak global demand will weigh on developing Asia in 2012 but growth rates in most economies remain robust and should tick back up in 2013 with private consumption providing support,” it said.

The projections for the Philippines are below that for developing Asia, where the ADB expects growth at 6.9% this year — down from 7.2% in 2011 — and 7.3% in 2013. In Southeast Asia, growth is likely to accelerate to 5.2% from 4.6% in 2011.

Laos is expected to post the highest growth among the 10 countries in the subregion, at 7.9% this year. Only Malaysia (4%), Singapore (2.8%) and Cambodia (2.6%) have projected growth rates below the Philippines.

Sought for comment on ADB’s growth projections, National Economic and Development Authority (NEDA) Assistant Director-General Ruperto P. Majuca said the figures were “a little low.”

“NEDA expects 2012 GDP [growth] to be within the range of 5-6%, while 2013’s might be in the vicinity of 6-7%,” Mr. Majuca said in a text message.

In addition to growth drivers mentioned by the ADB, he said election-related spending would prop growth in the last part of the year and in 2013.

On the other hand, University of the Philippines economist and former Budget Secretary Benjamin E. Diokno said the ADB’s 4.8% outlook was “on the optimistic side.”

“It fails to take account of the power outages in Mindanao, a recent development, and what appears to be continuing weakness of the global economy,” Mr. Diokno said. –KIM ARVEEN M. PATRIA, Businessworld