Skyline and buildings in Quezon City on January 11, 2023. Mark Demayo, ABS-CBN News

MANILA (UPDATE) -- The Asian Development Bank on Thursday lowered its 2024 growth forecast for the Philippines to 6 percent from 6.2 percent.

ADB Principal Country Specialist Cristina Lozano pointed to persisting risks to inflation for the revision.

“The slight downgrade of the outlook is basically [due to] the upside risks to inflation. Extreme weather events affect agricultural production. Food prices can affect inflation in the Philippines,” Lozano said.

Inflation pressures due to higher shipping costs are also seen to affect the prices of imported goods.

Despite the downgrade, ADB Philippines Country Director Pavit Ramachandran noted that the country is still expected to be among the fastest-growing economies in the region.

“The Philippines has been resilient. We do think it’s a frontrunner still in the region,” Ramachandran said.

In its latest Asian Development Outlook, ADB said growth may even pick up to 6.2 percent in 2025. 

The multilateral lender noted that inflation has been slowing while demand has been strengthening.

“Growth has remained robust, driven by domestic demand consumption and investment. Service sectors continue to be resilient,” he added.

ADB said it expects inflation to ease to 3.8 percent in 2024--or within the Bangko Sentral ng Pilipinas' 2 to 4 percent target range--on the back of slower global oil price hikes and an extension in reduced tariffs on major food items like rice, corn, and pork until December 2024.

Inflation is expected to slow down further to 3.4 percent in 2025. However, the multilateral lender also noted that the El Niño and La Niña may drive inflation up.

The multilateral lender also noted the government’s sustained push on infrastructure spending that could attract foreign investments.

Ramachandran believes that private sector participation and investment will be a key engine of growth for the country.

He urged increasing investments in renewable energy and digitalization to drive sustainable growth.

For these investments to materialize, ADB urged the government to improve the implementation of ease of doing business to position the Philippines as an investment destination.

“The Philippines lags behind its neighbors as an investment destination. Infrastructure and logistics gaps continue to hinder the manufacturing sector and hinder bringing investments,” Ramachandran said.

He added that reducing market barriers and improving access to finance for small and medium enterprises could be key actors in driving growth.

The ADB also said that strong retail trade, higher tourist arrivals and spending, and an expansion in business services will sustain growth in the services sector, which accounts for over half of the gross domestic product.

Ramachandran also noted that investments in large public infrastructure projects will boost government expenditures and improve the economy in the long term.

The Philippine economy grew 5.5 percent in 2023, below the government's target range of 6 to 7 percent.

Economic managers have since lowered their gross domestic product growth rate to 6-7 percent from 6.5-7.5 percent.

Meanwhile, the ASEAN+3 Macroeconomic Research Office (AMRO) believes the Philippines can grow 6.3 percent this year as it benefits from the rebound in the semiconductor industry.

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