ADB keeps PHL growth forecasts for 2024, 2025

The Asian Development Bank (ADB) has kept its Philippine economic growth forecasts for this year and 2025, with expansion expected to be driven by easing inflation and lower interest rates.

Philippine gross domestic product (GDP) is expected to expand by 6% this year and 6.2% in 2025, the ADB said in its December 2024 Asian Development Outlook report, unchanged from its September forecasts.

Both projections are within the government’s revised GDP growth targets of 6%-6.5% for 2024 and 6%-8% for 2025.

“Household consumption and investment continue to drive the economy with both rising faster in the third quarter. Moderating inflation and monetary policy easing should continue to support growth,” the multilateral lender said in a report on Wednesday.

“On the supply side, buoyant services sector, construction, and manufacturing are contributing to overall growth,” the ADB said.

Services will remain a major growth driver for the Philippines, “with retail trade, tourism, and information technology–business process outsourcing as major contributors,” it added.

“Public infrastructure projects continue to lift growth, along with brisk private construction,” the ADB said.

It expects the Philippines to be the second-fastest growing economy in Southeast Asia this year, behind Vietnam with 6.4% and ahead of Indonesia (5%), Malaysia (5%), Singapore (3.5%), and Thailand (2.6%).

“While Vietnam sees rising foreign investment, other Southeast Asian economies like Indonesia and the Philippines are on track to meet previous growth forecasts,” the ADB said.

“However, geopolitical tensions, trade fragmentation, and severe weather events—such as Typhoon Yagi and Tropical Storm Trami — pose risks to growth, particularly in agriculture and infrastructure,” it added.

A series of storms hit the Philippines in November, resulting in about P10 billion worth of farm damage, according to the Department of Agriculture.

The World Bank on Tuesday trimmed its GDP growth projection for the Philippines to 5.9%, from 6%, reflecting the impact of typhoons.

At the same time, the ADB cut its inflation forecast for the Philippines this year to 3.6% from 3.3%. It kept its inflation projection at 3.2% for 2025.

“Inflation is expected to remain within the central bank’s 2% to 4% target, providing scope for further monetary policy easing,” it said.

Since August, the Bangko Sentral ng Pilipinas has cut rates by 50 basis points, bringing the benchmark rate to 6%.

The Monetary Board is set to hold its final policy-setting meeting of the year on Dec. 19.

US POLICY RISKS

Meanwhile, developing Asia is likely to grow more slowly than previously thought this year and next, and the outlook could worsen if President-elect Donald J. Trump makes swift changes to US trade policy, the ADB said.

Developing Asia, which includes 46 Asia-Pacific countries stretching from Georgia to Samoa — and excludes Japan, Australia and New Zealand — is projected to grow 4.9% this year and 4.8% next year, slightly lower than the ADB’s forecasts of 5% and 4.9% in September.

The downgraded growth estimates reflect lackluster economic performance in some economies in the third quarter and a weaker outlook for consumption, the bank said.

Growth forecasts for China remain unchanged at 4.8% for 2024 and 4.5% for 2025, but the ADB lowered its projections for India to 6.5% for 2024 from 7% previously, and to 7% for next year from 7.2%.

“Changes to US trade, fiscal, and immigration policies could dent growth and boost inflation in developing Asia,” the ADB said in its report, though it noted most effects were likely to manifest beyond the 2024-2025 forecast horizon.   

Mr. Trump, who takes office on Jan. 20, has threatened to impose tariffs in excess of 60% on US imports of Chinese goods, crackdown on illegal migrants, and extend tax cuts.

“Downside risks persist and include faster and larger US policy shifts than currently envisioned, a worsening of geopolitical tensions, and an even weaker PRC (People’s Republic of China) property market,” the ADB said.

It lowered its inflation forecasts for 2024 and 2025 to 2.7% and 2.6%, respectively, from 2.8% and 2.9%, due to softening global commodity prices.

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Source: Business World and ADB

ADB keeps 6% 2024 PH growth outlook

The Asian Development Bank (ADB) kept its growth outlook on the Philippines for this year and next despite the support that consumption can get from softer inflation, as it flags external headwinds that can weigh on the economy.

In its flagship Asian Development Outlook released on Wednesday, the ADB retained its gross domestic product (GDP) growth forecast for its host country at 6 percent for 2024 and 6.2 percent in 2025.

If the prediction of ADB comes true, GDP growth this year would match the lower end of the 6- to 7-percent target range of the Marcos administration, but would fall short of the 2025 goal of 6.5 to 7.5 percent.

Nevertheless, the Philippines would tie with Vietnam as the fastest growing economy in Southeast Asia in 2024 and 2025.

Both countries would also beat the 5-percent average growth rate projected for Developing Asia—which refers to the 46 developing members of the ADB, for 2024. Next year, this region is forecast to grow at a slower pace of 4.9 percent.

For ADB, consumption, a traditional growth driver in the Philippines, could get some boost from lower consumer prices. The multilateral lender lowered its inflation forecast for the country to 3.6 percent in 2024, from 3.8 percent previously, partly due to lower tariffs on rice imports.

ADB said inflation was expected to ease further to 3.2 percent in 2025 compared to the previous projection of 3.4 percent.

In a statement, Pavit Ramachandran, ADB’s country director for Philippines, said “most of the ingredients for the Philippines’ sustained economic growth are in place.”

“Rising government revenues are boosting public expenditures on infrastructure and social services, increasing employment is driving consumption, and reforms to open the economy to more investments are underway,” Ramachandran said.

“With inflation slowing, the country is in a strong position to lead growth in Southeast Asia,” he added.

Headwinds

Government data showed the economy grew 6.3 percent in the second quarter. But analysts had said the figure was magnified by favorable base effects that masked the 4.6-percent growth in consumption, a pace that was uncommonly low for the Philippines.

To help stimulate household spending, the Bangko Sentral ng Pilipinas (BSP) in August cut the policy rate by a quarter point to 6.25 percent. By reducing borrowing costs, the BSP wants to encourage bank lending and consumption.

But the ADB said the Philippines would not be spared from external headwinds dragging global growth.

“External factors such as a sharper slowdown in major advanced economies and the People’s Republic of China, financial volatility due to US monetary policy decisions, geopolitical tensions, and rising global commodity prices also pose threats to growth,” the Bank said.

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Source: Inquirer

16M Filipinos facing medium-to-high risk of water stress

Poor Filipinos face a higher risk of experiencing floods and dry spells, the Asian Development Bank (ADB) said.

The ADB’s latest Key Indicators for Asia and the Pacific report showed that 16.1 million Filipinos experienced medium-to-high risk of water stress or experienced frequent droughts or intense flooding.

In comparison, 2.2 million people in Thailand experience the same level of water stress.

The report compared the Philippines and Thailand to show how countries with high poverty levels experience varying climate impacts depending on its geographical location. The data were measured using the Philippines’ 16.6% poverty incidence rate in 2018 and Thailand’s 7.8% poverty incidence rate in 2017.

“Poor communities are often disproportionately affected by climate change due to their limited financial resources to adapt or recover,” ADB Statistician Arturo M. Martinez, Jr. said in a virtual briefing.

The report showed that all major parts of the Philippines faced medium-to-high risk of water stress.

The entire Metro Manila was exposed to this risk, followed by the rest of Luzon (76%), Mindanao (75%) and the Visayas (71%.) Meanwhile, all regions in Thailand experienced at least 76% of medium-to-high risk of water stress.

Geographic mapping showed that nearly two-thirds of the Philippines’ poor communities, which are spread out around the country, are exposed to medium-to-high risk of water stress.

On the other hand, less than a fifth of Thailand’s land area was home to poor communities with high water risk, mostly in the northern region.

The report also showed that 12.7 million poor Filipinos lived in areas with medium-to-high flood risk, covering 59.6% and 51% of total land area susceptible to riverline and coastal flooding, respectively.

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This compares to 400,000 poor Thai people in areas facing medium-to-high flood risk, where 33% of the land area is vulnerable to riverline flooding and 3.7% to coastal flooding.

Metro Manila and the Visayas showed 100% vulnerability to coastal and riverline flooding. In Thailand, poor people were susceptible to riverline flooding.

The data were shown using “geographically granular” data, which uses satellite-based maps and computer algorithms to help identify priority climate risk strategies.

“Granular data on vulnerability to climate change may reveal the unique environmental, economic, social, and political challenges faced by diverse places and populations. These data are crucial for targeting regions that require immediate intervention and assistance especially under budget constraints,” Mr. Martinez said.

However, 66% of statistics agencies from the Asia-Pacific reported constraints in the availability, timeliness, and granularity of climate-related data, ADB said.

The ADB noted that poorer countries have a higher level of climate risk. Low-income economies face the highest exposure to climate-related disasters but less coping capacity, while high-income economies are exposed less but have stronger coping strategies.

“Such disparities between income levels and capacity to cope are often mirrored within economies, where impoverished communities typically bear the brunt of climate risks and possess fewer resources to manage them,” according to the report.

The ADB said Asia-Pacific countries are now giving higher priority on environmental protection than economic growth.

“This preference tends to become more prevalent as an economy’s income level rises. In wealthier economies, a larger proportion of respondents favor environmental protection, even if it incurs potential economic costs,” it said.

According to the report, 56.5% of lower middle-income economies in the region said that protecting the environment is a priority even if it causes slower economic growth and some loss of jobs. This is also seen in 59.5% of upper middle-income economies and 61.8% high-income economies.

ADB Chief Economist Albert F. Park said there is a need for more partnerships to make sure vulnerable countries are ready for climate-related disasters.

“To address climate change, we’re going to have a hard time to be effective if we don’t have good data,” he told the webinar.

“I would really emphasize the need to harmonize how we define things because if everyone’s collecting data in a different way, it does become difficult to link our understanding and to learn lessons across countries.”

POOR FLOOD MANAGEMENT

The Philippine government should focus on science-based long-term solutions and risk avoidance strategies like flood forecasting to address the flooding problem, GlobalSource Partners country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in a brief.

In late July, massive floods caused by Typhoon Carina and enhanced southwest monsoon exposed the government’s ineffective flood management strategies over the past decade, they said.

“Careful studies show that the root of the perennial flooding problem is continuity, or specifically, the lack of it,” GlobalSource said. 

In 2013, then-Public Works Secretary Rogelio L. Singson proposed a P351-billion flood control masterplan for 11 target areas in the country. However, the plan has not even reached 30% completion a decade since its conception, the Department of Public Works and Highways (DPWH) told senators recently.

“Records show that disbursements for flood control and management projects have decreased even as the budget allocation for these projects has been constantly increasing in the last five years,” GlobalSource said, citing Senate findings.

Citing a Senate press release, GlobalSource said 20% of the DPWH budget between 2020 to 2023 was allocated to flood management. This was increased to 25% in the 2024 budget.

However, the DPWH disbursed only 68.26% of its budget in 2021, 73% in 2022, and 58% in 2023, it said.

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Source: Business World