THE Asian Development Bank (ADB) has revised its Philippine growth outlook for 2015, taking into account the impact of weak external demand and government spending on the economy.
In an update to its flagship Asian Development Outlook (ADO) 2015, the Manila-based lender is now saying that the Philippine gross domestic product (GDP) is likely to grown by 6 percent this year from a forecast of 6.4 percent in the March.
The latest ADB forecast is below the 6.1-percent GDP growth last year and the 7 percent to 8 percent assumption by the Philippine government.
“The forecast is trimmed from ADO 2015 largely as a result of slow public spending early in the year,” Richard Bolt, ADB country director for the Philippines, said.
In the first half of 2015, the report noted that government spending fell below target, producing a small fiscal surplus of .2 percent of GDP.
Growth for the period came under pressure as manufacturing slowed, dampened by sagging demand for exports, and agricultural output was flat as the El Niño brought drought into farmlands.
For the first six months of the year, the report noted that the manufacturing sector slowed to 5.3 percent on weak demand from global buyers, while agricultural output was flat in the first half compared with the same period in 2014.
Moving forward, the ADB said the rebound in government spending in the second quarter is expected to spur economic growth through the rest of this year and into 2016.
“After a slow start of the year we are now seeing a pickup in fiscal spending which combined with spending linked to the May 2016 elections will help lift the domestic economy,” Bolt said.
Private investment and household consumption should continue to grow, with employment and remittances remaining robust and oil prices low, while services will remain the main growth driver led by robust business process outsourcing, tourism and retailing, he added.
The ADO, however, noted risks to its 2015 outlook include the unexpected slowdown in China and the large industrial economies, which would weigh on exports and investment.
A severe El Niño could push prices of food, water and electricity higher, as well as hurt rural incomes.
The ADB said the Philippine economy is expected to bounce back to 6.3 percent next year with a recovery in major industrial economies that should benefit Philippine exports and investment inflows.
“As exports growth is expected to outpace import growth, net external demand is seen contributing to GDP growth in 2016,” the report said.
Fiscal policy is likely to support a quickening of economic growth in 2016.
“The government’s proposed budget for next year targets a 15.2 percent rise in spending from the 2015 budget, with significant increases in social service and infrastructure investment, including programs for the continued rehabilitation of areas battered by Super Typhoon Haiyan late in 2013,” the outlook noted.
The bank emphasized that the economic outlook for next year is subject to more uncertainty than usual with the outcome of the national elections having a significant bearing on policy.