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ADB sees Philippine economy to grow 6% in 2023

The Asian Development Bank (ADB) has maintained its economic growth projection for the Philippines this year on the back of rising domestic demand and a recovery in the services sector, particularly tourism.

In the April 2023 edition of its flagship publication Asian Development Outlook (ADO), the ADB forecasted the Philippine economy to grow by 6.0% in 2023.

This is the same level that the multilateral lender projected for the country’s 2023 growth rate in the December 2022 ADO supplement.

The expected modest growth rate this year is lower than the 7.6% gross domestic product (GDP) recorded in 2022.

Nonetheless, the ADB’s growth outlook falls within the economic managers trimmed growth forecast of 6% to 7% for this year, citing external headwinds such as the slowdown in major advanced economies.

The ADB said the Philippine economic growth is expected to moderate “but will remain on a healthy expansion mode, underpinned by rising domestic demand and a recovery in services particularly tourism.”

"The Philippines will grow at its potential this year and next and is on track toward its goal to become an upper middle-income country,” said ADB Philippines country director Kelly Bird.

“Like most other economies, the Philippines will be increasingly challenged by the impacts of climate change and the effects of emerging technologies on the labor market,” Bird said.

“Key to sustaining a strong growth momentum is keeping public infrastructure spending at levels above 5.0% of GDP, as the government has planned for this year and in the medium term. High-impact infrastructure projects that will help connect communities to markets and public services and provide access to jobs and livelihood will help increase rural incomes and support inclusive growth,” he added.

The ADB cited recovery in employment and retail trade, sustained expansion in the manufacturing sector, and rising public infrastructure spending as factors supporting the Philippines’ growth.

The bank, however, said that risks from a sharper-than-expected slowdown in major advanced economies, heightened geopolitical tensions, and inflation stickiness could dampen the outlook for GDP growth.

For 2024, the lender is expecting the Philippine economy to grow faster by 6.2%.

Likewise, inflation is expected to average 6.2% in 2023 before easing to 4.0% in 2024, according to the ADB’s report.

The lender said local food supply constraints and rising global commodity prices led to high inflation rates in early 2023.

The ADB said that inflation is projected to decelerate in the second half of 2023 and through 2024 “as the series of monetary policy tightening takes effect and global commodity prices ease.”

The bank noted that the Philippines’ unemployment rate improved to 4.8% in January 2023 from 6.4% in the same period a year earlier, even lower than pre-pandemic levels.

Some 4.1 million jobs were added over the year, mainly from the services sector as the tourism started to rebound from the COVID-19 pandemic, it said.

“This bodes well for sustained private consumption, which should get an additional boost from steady remittances from overseas Filipino workers (OFWs),” the ADB said.

The bank took note that despite impressive gains in economic growth and poverty reduction, the country faces the challenge of addressing climate change and risks to food security, especially for the bottom two income deciles, as malnutrition and hunger incidence persist, the report says.

“The challenge requires a multipronged approach that considers both supply and demand factors,” it said.

“This includes addressing bottlenecks in local food production and agricultural productivity and trade and raising household incomes and incentives for better health and nutritional outcomes. Social protection, including food voucher programs, play a central role in alleviating poverty and hunger,“ the ADB said.—AOL, GMA Integrated News