ADB keeps growth outlook on Philippine economy

MANILA, Philippines — The Asian Development Bank kept its growth forecast for the Philippines in 2023, as a reopened domestic economy will churn expansion but risks remain as headwinds persist.

In its flagship Asian Development Outlook released Tuesday, the multilateral lender projected the Philippine economy would grow 6% this year, unchanged since they revised figures down last December.

The projection fell at lower end of the Marcos Jr. administration’s gross domestic product growth target of 6-7% in 2023.

Likewise, ADB is projecting the economy will grow further by 6.2% in 2024.

ADB’s growth forecast for the country was bullish within Southeast Asia, with its outlook on Vietnam expanding 6.5% outpaced its projection for the Philippines in 2023. 

"The Philippines will grow at its potential this year and next and is on track toward its goal to become an upper middle-income country,” said ADB Philippines country director Kelly Bird.

The ADB remained keenly aware of the headwinds roiling the global economy. The deceleration of advanced economies, geopolitical tensions, and inflation could all hamper growth, it said.

ADB’s 2023 forecast hinges on the continued recovery in labor markets as well as retail trade, manufacturing and even public infrastructure spending to underpin growth.

“Key to sustaining a strong growth momentum is keeping public infrastructure spending at levels above 5.0% of GDP, as the government has planned for this year and in the medium term,” Bird added.

The Marcos Jr. administration unveiled its P9-trillion flagship infrastructure projects in March, which looks to build 194 projects within its term.

The same ADB report project inflation will average 6.2% in 2023, with deceleration expected in the second half of the year as the impact of interest rate hikes seeps into the economy. The Bangko Sentral ng Pilipinas has hiked 425 basis points into its key policy to tame inflation that sapped the public’s purchasing power.

Inflation hit 8.6% year-on-year in February, but the central bank is expecting some reprieve in March as consumer price growth softened.

Even then, the ADB highlighted the growing risks of the climate crisis on the Philippines and food security. For context, economists pointed out in past months that the Marcos Jr. administration could have easily managed its inflation problem if it devoted more time to building production chains in the country, as supply bottlenecks fanned inflationary pressures.

“Despite impressive gains in economic growth and poverty reduction, the country faces the challenge of addressing climate change and risks to food security, especially for the bottom two income deciles, as malnutrition and hunger incidence persist,” the ADB report read.