ADB keeps 2018 Philippine GDP outlook at 6.4%, revises up CPI forecast to 5.3%

13, Dec. 2018

MANILA, NNA – The Philippines’ economic growth is expected to slow to 6.4 percent in 2018 from 6.7 percent in 2017, in line with an earlier projection, while inflation is likely to accelerate sharply, the Asian Development Bank said Wednesday.

It raised its price outlook to 5.3 percent from 5.0 percent forecast three months ago, on higher food and energy costs, and compared with 2.9 percent posted last year.

Looking ahead, the ADB left its economic projection for the Philippines for 2019 unchanged from its September forecast that GDP growth will pick up to 6.7 percent, led by robust public and private investment, and inflation will decelerate to 4.0 percent.

The forecast 6.4-percent GDP growth for this year is still above the bank’s estimates of 5.1 percent in Southeast Asia and 6.0 percent for developing Asia.

The Philippine government’s GDP growth target is set higher in a range of 6.5 to 6.9 percent for this year, and 7 to 8 percent in 2019.

In its development outlook supplement, the ADB noted Philippine GDP growth “remained strong” at 6.3% in the first three quarters of 2018, backed by robust business investment and solid private consumption, although it moderated from 6.8% a year earlier.

Investment growth accelerated to 16.7 percent in the first three quarters from 9.8 percent a year earlier, while growth in government spending also picked up on higher social service expenditure and on salary hikes for government workers.

On the downside, the ADB said the “drag on GDP growth from net exports deepened as strong domestic demand fueled a surge in imports, especially of capital goods, and as a weaker external environment slowed export growth.”

Inflationary pressures remain high in the Philippines. The year-on-year rise in the consumer price index averaged 5.2 percent in the January-November period, up from the 2.9 percent a year earlier and well above the government target range of 2 to 4 percent.

The ADB said the three main drivers were high food prices amid weak agricultural output, high global oil prices earlier in the year and new excise taxes on fuel products.

“While inflation is expected to ease, the full-year average is still likely to exceed the projection in the [previous forecast],” it said.