ADB sees modest growth for Phl economy

MANILA, Philippines - The Philippines and the rest of the emerging East Asian countries are forecast to post modest growth this year and next, with only Indonesia and Vietnam bucking the trend.

According to a report by the Asian Development Bank (ADB), the Philippine economy is expected to grow five percent this year and improve slightly to 5.3 percent in 2012. Gross domestic product (GDP) growth in 2010 stood at a 30-year record of 7.6 percent.

After its economy grew 6.1 percent in 2010, Indonesia on the other hand, is expected to expand in 2011 by 6.4 percent and improve further to 6.7 percent in 2012.

Meanwhile, Vietnam’s GDP expanded 6.8 percent last year and is forecast to correct to 6.1 percent this year. With the momentum gained in 2011, its economy is expected to surge 6.7 percent in 2012.

Like the Philippines, Thailand’s economy ballooned 7.8 percent last year but is expected to slow down to 4.5 percent this year and likely moderate to 4.8 percent in 2012.

“Consumer confidence index indicates that the Philippines has one of the highest among the Asean nations at 127.6 over the 115.2 of Indonesia, the 102.3 of Thailand and the 87.2 of Malaysia,” the ADB report stated.

Likewise, economic growth in the Philippines moderated to 4.6 percent in the first quarter of 2011 from 6.1 percent in the last quarter of 2010 due to lower government spending and weaker trade.

Emerging East Asia will expand 7.9 percent this year from a nearly double-digit growth of 9.3 percent in 2010. In 2012, the region’s growth is expected to slow down to 7.7 percent.

The 10-member Association of South East Asian Nations (Asean) will likely also take the modest route of 5.5 percent economic growth this year and 5.7 percent in 2012, from 7.9 percent in 2010.

Based on the July edition of ADB’s Asia Economic Monitor (AEM) released yesterday, the four major risks to the region’s expansion this year are the following: rising inflation leading to wage-price spirals; a weaker than expected recovery in Japan and unresolved debt problems in the eurozone and the United States; an increasing financial market volatility; and destabilizing short-term capital flows.

“After a strong rebound in 2010, economic growth in emerging East Asia will moderate this year and in 2012 as authorities continue to battle inflation and as advanced economies try to shore up an anemic recovery,” it said.

It said that the three middle-income economies of Malaysia, the Philippines and Thailand should see growth taper due to diminished export demand and tighter monetary policy.

“Indonesia stands to buck the trend with strong domestic demand expected to drive growth to 6.4 percent in 2011, above its 6.1 percent growth in 2010,” the ADB report added.

Growth in the People’s Republic of China moderated slightly to 9.5 percent in the second quarter of 2011 from 9.7 percent in the first quarter. A slow external environment and tighter monetary stance are expected to moderate growth to more sustainable levels of 9.6 percent for the full year and 9.2 percent in 2012.

The highly trade-dependent newly industrialized economies (NIEs) of Hong Kong, South Korea, Singapore and Taipei should also see a return to more sustainable long-term levels of growth as a weakened external environment slows exports.

“Growth is easing in most of emerging East Asia as authorities wind down fiscal stimulus measures and tighten monetary policies to counter rising inflation,” said Iwan Azis, head of ADB’s Office of Regional Economic Integration that prepared the report. “This is actually a good thing so stronger economies like the People’s Republic of China (PRC) don’t overheat.”