Daily TribuneGrowth factors include slowing inflation, a relatively low jobless rate, and higher government spending on infrastructure
The economy could grow by six percent this year to become one of the strongest in Asia, the Asian Development Bank (ADB) said Thursday.
ADB said growth factors are slowing inflation, a relatively low jobless rate, and higher government spending on infrastructure.
“The Philippines has been resilient. We think it is still a front-runner in the region,” ADB country director for the Philippines Pavit Ramachandran said.
The local economy grew by 5.6 percent last year, according to the Philippine Statistics Authority. The Development Budget Coordination Committee also expects the economy to grow by at least 6 percent this year.
For 2025, ADB sees the local economy growing further to 6.2 percent.
Ramachandran said local inflation might settle at 3.8 percent for the entire year or within the 2 to 4 percent target of the Bangko Sentral ng Pilipinas.
“Core inflation, which excludes food and fuels, has declined, suggesting there is some easing down the line of price pressures,” he said.
“The central bank has kept its interest rate steady and has done a good job in maintaining financial stability,” Ramachandran added.
Core inflation last month dropped to 3.4 percent from 8 percent in the same month last year, data from the statistics authority show.
Meanwhile, headline inflation, which includes food and fuels, rose to 3.7 percent in March from 3.4 percent in February amid El Niño.
With manageable inflation rates, Ramachandran said household consumption will remain robust. “Domestic demand will continue to lift economic growth,” he said.
Ramachandran added that low unemployment rates among Filipinos will further increase consumption and production activities.
Preliminary data from the statistics authority showed Thursday that the country’s unemployment rate improved to 3.5 percent in February from 4.5 percent in January.
“Strong retail trade, higher tourist arrivals and receipts, and an expansion in business services will sustain growth in the services sector, which account for over half of gross domestic product (GDP) and employment,” Ramachandran said.
Further, he said the massive infrastructure plan of the government and its aggressive campaign for public-private partnerships or PPPs will further attract foreign investments.
“There’s a big effort now to move to clean energy that is underscored by strong targets. These infrastructure projects are crucial in boosting productivity, competitiveness and connectivity in the Philippines,” Ramachandran said.
The Marcos administration aims to ensure that private firms’ business operations would run efficiently through sustained infrastructure spending of five to six percent of GDP each year.
It approved 185 infrastructure flagship projects worth over P9 trillion. Ramachandran said at least 25 percent of the projects are open for Public-Private Partnerships.
Meanwhile, Abdul Abiad of ADB’s macro-economics research said prices of some goods might rise if geopolitical tensions worsen.
“We highlight the risk of escalating conflict in the Middle East and the Russia-Ukraine conflict. The attacks in the Red Sea have caused trade disruptions, causing ships to take longer routes and that has raised the cost of shipping,” he said.
Based on ADB studies, Abiad said higher chipping costs and rice prices could push up Asia’s overall inflation by 24 percentage points.
Given the threats to food supply, Ramachandran advised the government to also improve the agriculture sector.
“Generally in the agriculture sector, there are still issues in productivity. The agriculture sector has only grown by 2 percent since 2010,” he said.
