ESCAP cuts Philippine GDP growth projections

THE UNITED NATIONS’ (UN) regional development arm has lowered its Philippine economic expansion forecasts for 2017 and 2018, even as the country will still be rivaled only by China and India among Asia’s fastest-growing major economies in those years.

In a year-end update to its Economic and Social Survey of Asia and the Pacific 2017, the UN Economic and Social Commission for Asia and the Pacific’s (ESCAP) cut its Philippine gross domestic product (GDP) growth projections to 6.6% this year and 6.8% next year, from its previous 6.9% and 7.0% estimates, respectively, that were given in May.

If realized, it would be slower than 2016’s actual 6.9% expansion. The Philippines outpaced comparable major Southeast Asian peers last year and China (6.7%), even as it was outdone by India (7.1%). The Philippines also outpaced Southeast Asia’s 4.5% average and the 5.2% recorded for developing ESCAP economies in 2016.

Philippine GDP growth clocked 6.7% in this year’s first three quarters, against the government’s 6.5-7.5% full-year target. The government has adopted a 7-8% annual target till 2022, when President Rodrigo R. Duterte ends his six-year term.

At ESCAP’s projected pace, the Philippines will be matched by India and outpaced only by China (6.8%) this year among comparable Asia-Pacific economies, and will outdo China (6.6%) but will be outpaced by India (7.0%) next year.

The Philippines is projected to lead the other four major Southeast Asian economies on the list (Indonesia, Malaysia, Thailand and Vietnam) in both years.

It will also top the 4.8% and 4.9% projected averages for Southeast Asia and developing ESCAP economies’ 5.4% and 5.3% for 2017 and 2018, respectively.

ESCAP’s projection matches the International Monetary Fund’s (IMF), World Bank’s and Organization for Economic Cooperation and Development’s (OECD) 6.6% estimates this year, and compares to Asian Development Bank’s (ADB) 6.5%.

Next year, IMF, World Bank and ADB forecast a 6.7% growth rate for the Philippines, while the OECD has projected a 6.4% annual average in 2018-2022.

Philippine inflation is also expected to remain supportive of growth, with the pace expected to pick up to 3.1% in 2017 and 3.3% in 2018 from last year’s actual 1.8% — staying within the central bank’s 2-4% target range for the next two years. Inflation averaged 3.2% in the 11 months to November, matching the central bank’s forecast average for this year.

“Economic conditions in Asia and the Pacific are stable, and economic growth is expected to increase slightly in the near future,” the report read.

“Domestic private consumption remains the dominant source of economic growth. This is facilitated by relatively low and steady inflation, low interest rates, growing purchasing power and high consumer confidence… The increase in consumer confidence has been supported by declining economic uncertainty since January 2017.”

While the report did not cite the reason for lower Philippine GDP projections, it noted that “the currency that is experiencing depreciating pressure most is the Philippine peso” and that “efforts of the Philippines to build infrastructure has increased capital imports, thus, worsening the country’s external position and increasing its reliance on foreign financing; this situation is amplifying the downside for the currency despite rising remittances.” — Elijah Joseph C. Tubayan