The Asian Development Bank (ADB) in its latest outlook kept its 6.4 percent growth forecast for the Philippine economy this year unchanged, seeing private investment, household consumption and election spending mainly driving the expansion.
“Private investment and household consumption remain strong . . . supporting the maintenance of GDP [gross domestic product]forecasts of 6.4 percent for 2015,” ADB said in the latest Asian Development Outlook (ADO) Supplement launched on Thursday.
ADO is ADB’s flagship annual economic publication.
The Manila-based lender’s 2015 growth outlook is more optimistic than the 6.1 percent GDP expansion last year, but below the 7 percent to 8 percent growth assumption of the Philippine government.
ADB also stressed that election-related spending is expected to boost domestic demand through May 2016, when elections will be held.
Public spending still weak
However, the lender warned that risks to its growth outlook for the Philippines include weaker-than-expected recovery in the major industrial economies, as well as continued slow public spending, “despite government measures taken to improve budget execution.”
Besides ADB, most private analysts also left their growth forecasts unchanged for 2015.
Debt watcher Fitch Ratings retained its 6.3 percent growth projection for the Philippine economy this year but said slow government spending continues to pose a risk.
Analysts from the Bank of the Philippine Islands (BPI) kept their 6.5 percent growth outlook steady, saying that government spending is likely to recover in the second half of the year.
UKbased investment bank Barclays also sees the economy growing by 6.5 percent this year, but qualified its position by saying this hinges on the capacity of the economy to rebound by the second quarter.
While real GDP growth slowed to 5.2 percent year-on-year in the first quarter from the revised 6.6 percent in the fourth quarter of 2014, Global think tank BMI Research expects strong domestic demand to provide a measure of support for the economy.
BMI Research analysts are keeping their forecast at 6 percent, but warned that a slowdown in exports may pose downside risk.
ADB cuts Developing Asia outlook
The ADB cut its 2015 growth forecast for Developing Asia to 6.1 percent from the previous 6.3 percent amid slower-than-expected economic activity in the United States and China.
“Slower growth in the PRC is likely to have a noticeable effect on the rest of Asia given its size and its close links with other countries in the region through regional and global value chains,” said ADB chief economist Shang-Jin Wei.
“While weaker-than-expected external demand, a declining working age population, and rising wages, have contributed to a slower rate of growth in the PRC, reforms aimed at improving labor market flexibility and capital allocation to the most productive firms are needed as they can also help to raise the growth rate,” Wei said.
Southeast Asia will see slower-than-previously forecast growth of 4.6 percent for 2015, weighed down by lower-than-expected first-half performances in Indonesia, Singapore, and Thailand, the ADB Supplement added.