ADB maintains PHL growth forecast at 5.7% for 2023

THE ASIAN Development Bank (ADB) maintained its growth forecasts for the Philippines for this year and 2024, as it expects robust domestic demand to continue.

In its latest Asian Development Outlook report, the multilateral lender kept its Philippine gross domestic product (GDP) growth projection at 5.7% this year and 6.2% next year.

“The growth forecasts for Indonesia and the Philippines for both years are maintained as both countries showed robust growth in the first nine months of 2023; this momentum is expected to continue, despite tighter financial conditions,” it said.

The ADB’s forecast for the Philippines makes it the fastest-growing economy in Southeast Asia for this year and in 2024.

However, the projections are below the government’s 6-7% and 6.5-8% growth targets for 2023 and 2024, respectively.

“The growth forecast for the Philippines for 2023 is unchanged. The economy continues to be supported by domestic demand, with growth accelerating to 5.9% in the third quarter, averaging 5.5% in the first nine months,” the ADB said.

To meet the lower end of the government’s 6-7% GDP target this year, the economy would need to expand by 7.2% in the fourth quarter.

“Household consumption eased in the third quarter due in part to elevated inflation, but overall it remained robust amid low unemployment and steady remittances from overseas workers,” the ADB said.

The ADB also noted that government expenditures, infrastructure spending, and employment figures also showed an improvement.

It maintained the GDP growth outlook at 6.2% for 2024 amid expectations that strong domestic demand will continue.

“The business outlook, based on the central bank’s third-quarter survey, was more upbeat for 2024 on anticipation of buoyant domestic demand. Manufacturing PMI (purchasing managers’ index) in November rose at its strongest pace in 10 months. And services exports, particularly business process outsourcing and tourism, posted double-digit growth,” it said.

However, the multilateral lender also said policy makers in developing Asia must remain vigilant as risks to growth still remain, including uncertain global economic conditions, persistent core inflation, and further tightening.

Meanwhile, the ADB retained its inflation forecasts for the Philippines at 6.2% this year, and 4% in 2024.

The ADB’s 6.2% inflation projection this year is still above the central bank’s 2-4% target range and full-year forecast of 6%.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 3.7% next year.

“The monetary authorities hiked the policy rate by another 25 basis points (bps) in October, which will help contain inflation,” the multilateral lender said.

From May 2022 to October this year, the BSP has raised interest rates by 450 bps, bringing the benchmark interest rate to a 16-year high of 6.5%.

However, the ADB noted that food inflation is still a challenge for most countries in the region, including the Philippines.

“All these economies are facing double-digit increases in international rice prices on supply concerns. Latest policy rate increases in Indonesia and the Philippines are meant to keep inflation at bay,” it added.

Food inflation eased to 5.8% in November from 7.1% in October and 10.3% in the same month a year ago.

Rice prices have been volatile this year, prompting the government to impose a one-month price ceiling on the key commodity. In September, rice inflation surged to 17.9%, the highest print since March 2009. — Luisa Maria Jacinta C. Jocson