Weak global demand drops export earnings sharply in the third quarter and reduced the country’s 6 percent economic growth forecast for 2015 in an updated report submitted by the Asian Development Bank (ADP) to its Asian Development Outlook Supplement, Thursday. Philippine gross domestic product (GDP) prediction continues to fall from 6.4 percent in March down to 6 percent in September and now at 5.9 percent but still remains one of the fastest economies in Asia.
In its latest report, ADB noted that “private investment recorded robust expansion and household spending was supported by higher employment, low inflation, and remittance inflows from Filipino workers overseas” last quarter. It also added that “Government expenditure accelerated rapidly, with public expenditure rising by 41.2 percent in the third quarter as budget execution was enhanced.” ADB believes that the country’s GDP growth will increase in 2016 to 6.3 percent.
Meanwhile, a separate report submitted by the Standard Chartered Bank (StanChart) predicts no increase for the country’s GDP growth in 2016. The slight boost in government spending due to election has been noted but retains the forecast at 5.7 percent which is the same rate forecast delivered for 2015, and 6 percent in 2017.
At present, India is leading at 7.4 percent, then China’s 6.9 percent and Vietnam’s 6.5 percent. Developing Asia is expected to grow by an average of 5.8 percent.
Economists Jeff Ng and Edward Lee in their bank report entitled Global Focus–Economic Outlook 2016 recommends for retreat, regroup, rebound. “We expect manufacturing, government services, private services and transport communications and storage sectors to benefit in the lead up to the election, boosted by increased demand for printing and publishing, media services, advertising and public administration spending.” This may provide a 0.1 to 3.0 ppt (percentage point) boost to 2016 GDP growth, they said. They also see a possible decrease in state spending early next year prior to the May 9 presidential elections “but we expect activity to pick up once a new government is in place.”
External factors are expected to affect GDP growth next year, Ng and Lee wrote in their report. Investment and export growth face challenges and that this may offset other positives in the economy in 2016 and also growth of investments is likely to stabilize at a moderate level next year. Yet, “The Philippines remains an attractive destination for FDI (foreign direct investments) given its favorable labor dynamics and potential for development,” they said.