MANILA, Philippines - The Asian Development Bank (ADB) raised the gross domestic product (GDP) growth forecast for the Philippines to 5.5% in 2012, while it cut forecasts for most Asian countries.
In its update of the Asian Development Outlook 2012, the ADB said the Philippine economy is expected to grow even faster at 5.5% this year. This is higher than its original forecast of 4.8% last April. This takes into account the higher-than-expected growth in the first half and more moderate growth seen in the second half.
"Robust private consumption and a rebound in government spending drove economic growth higher than expected in the first half of 2012, prompting an upward revision of the forecast for the full year," the ADB report said.
The GDP growth target for 2013 remains the same at 5%. "The impact of the 2012 rebound in government spending will fade in 2013 (though capital spending will increase) and net exports will likely weigh on GDP growth, as growth in imports is projected to outpace that for exports," the report said.
The ADB noted that upgrades in indicators of competitiveness and sovereign ratings show improvements in the investment environment in the Philippines.
ADB forecasts inflation at 3.5% in 2012, and 4.1% in 2013, on higher global food prices and pressures from sustained strength in domestic demand.
More jobs needed
The ADB said the uncertainty in the global economy may hurt the Philippines' economic forecasts.
"Weaker-than-expected growth in industrial countries and the PRC (China) would hurt prospects for exports, investment, and remittances. Further delays affecting public–private partnership projects would dent investor sentiments," it said.
Jobs creation and poverty rdeuction remain challenges for the Philippines.
"Increased business confidence bodes well for investment and future jobs. But the Philippines must guard against weaknesses outside its own economy that could have a knock-on effect," ADB chief economist Changyong Rhee said, in a statement.
While the government reports the number of new jobs have grown by a million from a year ago, the ADB noted this only slightly exceeds the overall growth in labor force and a rise in part-time employment. The number of full-time jobs dropped by 500,000 last year.
"The key challenge is to link economic growth to poverty reduction. Despite solid economic growth, job generation remains inadequate, reflected in rates of unemployment and underemployment. The incidence of poverty remains high at 26.5% in 2009, compared to 26.4% in 2006 and 24.9% in 2003," said Neeraj Jain, ADB country director for the Philippines.
Robust private consumption and investment will continue to help boost the service sector. The business process outsourcing industry is expected to continue to grow, with revenues growing by 20% annually through 2016.