MANILA, Philippines — The Philippine economy is going through a “golden age,” the Asian Development Bank said on Wednesday, with the country’s growth seen outpacing its peers in the region on the back of strong investment and domestic consumption.
“I think I would call it a golden age for the Philippines because it is growing in a very sound macroeconomic policy framework,” Kelly Bird, ADB Philippine Country Office Director, said in a press conference.
In its Asian Development Outlook for 2018, the Manila-based multilateral lender kept its 2018 growth forecast for the Philippines at 6.8 percent, faster than the 6.7 percent clip in 2017.
For 2019, the ADB said the Philippine economy will likely accelerate to 6.9 percent.
However, the ADB’s projections were below the government’s 7-8 percent target for 2018 until the end of President Rodrigo Duterte's six-year term. The current government plans to spend more than P8 trillion on infrastructure until 2022 to spur gross domestic product growth.
“Rising domestic demand, remittances, and employment, in addition to infrastructure spending, will drive growth” in the Philippines, the ADB said.
“We expect this growth to further lift wage employment numbers, add to household incomes, and benefit more poor families across the archipelago,’ it added.
Nonetheless, the lender’s forecast for the Philippines is above the 6.0 percent and 5.9 percent growth estimates for 2018 and 2019, respectively, for the 45-member Developing Asia.
The Bank also expects the Philippine economy to surpass China’s growth until 2019.
“Economic growth is high and it has been sustained and this expansion has been the longest in over 50 years,” Bird told reporters.
“It has also been an economic expansion that occurred in a very sound macroeconomic policy environment,” he added.
Moving forward, ADB said services sector will continue to drive economic expansion, along with manufacturing and construction industries.
“The approval of the Tax Reform for Acceleration and Inclusion law in December 2017 will augment tax revenues and provide additional fiscal space for more progressive public spending,” the lender said.
Risks
In the same report, the ADB said Philippine inflation will likely hit 4 percent in 2018 before easing to 3.9 percent in 2019, with rising prices of global oil and higher excise taxes seen pushing up the prices of key consumer items this year.
The government has set an annual inflation target range of 2-4 percent from 2018 until 2020.
Managing the rollout of the government’s “Build, Build, Build” infrastructure program is also a “major” policy challenge to the country’s growth outlook, the Bank said, adding that the state should improve the technical capacity of government agencies.
Meanwhile, there are external risks to the Philippines’ growth story brought by heightened volatility in international financial markets and protectionist trade measures, the ADB said, although the country’s strong external payments position would cushion these effects.
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