ADB sees Philippine economy growing by 6% in 2024

The Asian Development Bank (ADB) expects the Philippine economy to grow faster this year in light of slowing inflation and improved domestic demand.

Citing the Manila-based multilateral lender’s flagship publication, Asian Development Outlook (ADO), ADB Philippines country director Pavit Ramachandran said the bank projects the Philippines’ gross domestic product (GDP) to expand by 6% in 2024, faster than the 5.6% growth rate seen in 2023.

The ADB’s forecast falls within the lower end of the Marcos administration’s GDP target range of 6% to 7% for the year.

For 2025, the economic growth rate will pick up further to 6.2%, also falling within the government’s 6.5% to 7.5% target for next year, Ramachandran said. 

In the April edition of the ADO, the bank cited moderating inflation and the consequent monetary easing that would bode well for investments and consumption to pick up as factors for growth this year and next.

The ADB projects inflation to ease to 3.8% in 2024 and 3.4% in 2025, which are within the government’s 2% to 4% target range. The average inflation rate in 2023 stood at 6%.

Decelerating global oil prices and an extension in reduced tariffs on major food items, including rice, corn, and pork, until December 2024 will help contain food inflation, according to the ADO.

However, compared to the December edition of the ADO, the ADB’s 2024 growth outlook was lower than its previous forecast of a 6.2% GDP growth rate. 

“We slightly moderated the forecast [in 2023] when we projected 6.2% for this year,” Ramachandran said.

The ADB’s Philippine head said severe weather conditions such as El Niño and the possible La Niña could contribute to upside inflationary risks.

Likewise, the slowdown in major advanced economies, heightened geopolitical tensions, and higher-than-expected global commodity prices could also weigh on growth, according to the ADO.

Nevertheless, Ramachandran said, “We still see the Philippines as one of the frontrunners in the growth leaderboard in the region, anchored on strong macroeconomic and fiscal policy effectiveness.”

”We believe that the enabling environment is there with the structural reforms [such as] opening a number of strategic sectors to foreign ownership,” he said.

Ramachandran said the Philippines should focus on improving the ease of doing business to attract more investments, as it lags behind its peers in the region in terms of foreign direct investments. 

The ADO said that promoting higher levels of private sector participation in the economy will be vital to further raising growth and productivity.

The report also said that an enhanced public-private partnership (PPP) regulatory framework with the signing last month of the PPP Code of the Philippines Act Implementing Rules and Regulations will help further mobilize private investment for infrastructure development, including green and resilient energy and telecommunications.

Also supporting the Philippines’ growth for 2023 was the low unemployment rate, which would support household spending as “strong retail trade, higher tourist arrivals and receipts, and an expansion in business services will sustain growth in the services sector, which account for over half of gross domestic product and employment.”

The government’s infrastructure initiative would also boost growth as it would attract private sector investments from both local and foreign players.

“The Philippines’ growth momentum is picking up speed, driven by the government’s efforts to improve budget execution, mobilize additional revenue, and pursue reforms to boost the investment climate.

Investments in large public infrastructure projects, as well as much-needed social services, will boost government expenditures and bode well for the economy in the long run,” Ramachandran said.

Under the Marcos administration’s “Build Better More” program, 67 flagship projects are currently underway, with 30 more projects approved as of March 2024.

The program includes bridges, expressways, ports, and railways, among others. 

Some of the projects are funded by ADB, such as the Malolos Clark Railway Project and the South Commuter Railway Project, which will link Metro Manila to northern and southern provinces in Luzon. — VBL, GMA Integrated News