Manila-based Asian Development Bank (ADB) expects the Philippine economy will continue to sustain its growth momentum this year and in 2025, and has maintained a gross domestic product (GDP) outlook of six percent for this year and 6.2 percent in the next.
The GDP growth projections are the same numbers ADB announced in April, along with an inflation forecast for 2024 of 3.8 percent and 3.4 percent in 2025 – both are within the Bangko Sentral ng Pilipinas’ (BSP) target range of two percent to four percent.
On Wednesday, July 17, ADB said that based on its July 2024 Asian Development Outlook (ADO), an update of the April edition, the “moderating inflation and expected monetary easing in the second half of 2024 will support household consumption and investment.”
It noted that “domestic demand, along with a recovery in merchandise exports, drove the 5.7% GDP growth in Q1 (first quarter) 2024” while “household consumption growth, while below last year’s level, remained the main contributor supported by low unemployment and remittances from overseas workers.”
ADB did not change its growth estimates for the Philippines due to “brisk public infrastructure spending” which it expects will boost growth which last year, was 5.5 percent. The government GDP targets for this year is six to seven percent and 6.5 percent to 7.5 percent for 2025.
“Merchandise exports rebounded, particularly electronic products (about 60% of total exports), while services exports remained buoyant, including tourism and business process outsourcing,” it noted, citing previous GDP data.
ADB expects Southeast Asia to report growth of 4.6 percent this year and 4.7 percent in 2025 with a steady inflation path of around three percent. Last year, the region’s GDP grew by 4.1 percent. Southeast Asian nations are: Philippines, Brunei Darussalam, Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia, Myanmar, Singapore, Thailand, Timor–Leste, and Vietnam.
The Philippines and Vietnam are both projected to grow by six percent this year and 6.2 percent in 2025, although the latter is expected to have a higher inflation outlook compared to the Philippines.
After the Philippines and Vietnam, ADB projects Indonesia to grow by five percent this year and in 2025; Malaysia at 4.5 percent this year and 4.6 percent in 2025; Thailand at 2.6 percent this year and three percent in 2025; and Singapore at 2.4 percent this year and 2.6 percent in 2025.
ADB also raised its growth forecast for developing Asia and the Pacific this year to five percent from a previous projection of 4.9 percent, citing improving regional exports and resilient domestic demand. For 2025, the growth outlook remains at 4.9 percent.
Inflation is estimated to be about 2.9 percent this year “amid easing global food prices and the lingering effects of higher interest rates,” according to the ADO.
“Most of Asia and the Pacific is seeing faster economic growth compared with the second half of last year,” said ADB Chief Economist Albert Park. Growth in developing Asia accelerated in the first quarter of 2024 due to domestic demand and strong export growth, particularly in electronics.
He added that “the region’s fundamentals remain strong, but policy makers still need to pay attention to a number of risks that could affect the outlook, from uncertainty related to election outcomes in major economies to interest rate decisions and geopolitical tensions.”
In the April ADO, ADB reduced the 2024 Philippine growth forecast from 6.2 percent to six percent due to worries of “severe weather events” such as a prolonged El Niño dry weather episode and possible strong typhoons later in the year due to the La Niña phenomenon. These factors will add to price pressures and impact on inflation, said ADB.
Despite all these challenges, ADB Philippines Country Director Pavit Ramachandran said previously that the economy’s growth momentum “is picking up speed, driven by the government’s efforts to improve budget execution, mobilize additional revenue, and pursue reforms to boost the investment climate.”