Asian Development Bank: PH at risk for slowest economic growth in 4 years

WITH decreases in exports and agricultural production, the Philippine economy is headed for its slowest economic growth in four years, according to the Asian Development Bank (ADB).

Along with lackluster public spending, the Manila-based ADB has trimmed its 2015 growth projection for the Philippines from 6.4 percent to 6 percent, according to CNN.

ADB moved to update its 2015 Asian Development Outlook on Tuesday, Sept. 22, after the economy posted slower growth rates in the first two quarters – 5 percent in the first and 5.2 percent in the second – due to a weakened global demand for exports and the contraction in agricultural output caused by El Niño, Rappler reported.

Recently, the peso also fell 4.6 percent against the US dollar by mid-September, “as global volatility took hold of global markets causing foreign funds to exit developing markets,” Rappler reported.

The bank further forecasts that the Association of South East Asian Nations (ASEAN) is set for its slowest growth since 2000 at 4.4 percent this year and 4.9 percent in 2016; growth for greater developing Asia will also slow from 6.3 percent to 5.8 percent for 2015 and 2016, the ADB predicts.

“There are considerable headwinds to growth in Asia although it remains the largest source of global growth. Risks to the outlook increased coming from capital flow reversals and currency depreciation although these are manageable,” said Joseph Zveglich Jr., ADB director for macroeconomic research, according to Philstar.

However, among Southeast Asian countries, the bank maintains positive prospects for the Philippines, which has an above average growth rate.

“All in all, growth will [remain] favorable. We assess that economic expansion will continue and will accelerate on the second half of the year,” ADB Country director Richard Bolt said in a briefing, Philstar reported.

Despite low gains in the first semester of the year, the Aquino administration is aiming for a 7- to 8-percent growth rate for 2015.

“After a slow start to the year we are now seeing a pickup in fiscal spending which combined with spending linked to the May 2016 elections will help lift the domestic economy,” Bolt said.

He added that increased investments in public goods and infrastructure, coupled with higher private consumption and more jobs, could prompt more growth, according to CNN.

“Recently enacted reforms to improve competitiveness and to attract investment will play a key role in the future growth as will continued reforms and investments in infrastructure and other public goods,” Bolt said.

Along with lower growth rates predicted, the ADB also forecasts lower inflation because of lower oil prices that are likely to carry on until 2016, according to Philstar.

In spite of slowed growth, Rappler reported that the ADP still anticipates that Asia will maintain its role as the largest contributor to global GDP, although it may require reforms to pull through.

“Emerging markets are facing receding capital flows and depreciating currencies – a trend that may be exacerbated by the upcoming rise in US interest rates. Implementing macroprudential policies and developing local currency bond markets can bolster financial resilience and mitigate risks to borrowers,” the ADB report stated.