The slower pace of economic expansion in the first three quarters of the year forced the Asian
Development Bank (ADB) to revise downward its growth estimate for the Philippines in 2014.
In the Asian Development Outlook Supplement, the ADB said the Philippine economy is now projected to post a growth of 6 percent from the September estimate of 6.2 percent.
“After GDP [gross domestic product] in the Philippines rose by 6.1 percent in the first half, the growth
pace fell back to 5.3 percent in the third quarter. Robust private consumption, and higher private investment and net exports were insufficient to balance unexpectedly weak public spending,” the ADB said.
“As growth in the first nine months of the year reached only 5.8 percent, the 2014 GDP growth forecast is downgraded by 0.2 percentage points to 6 percent,” it added.
Socioeconomic Planning Secretary Arsenio M. Balisacan said even if the ADB has cut its forecast for this year, posting a growth of 6 percent was respectable.
This estimate is below the government’s full-year target of 6.5 percent to 7.5 percent this year. Balisacan earlier said achieving the low end of the target would already be “very challenging” this year.
Balisacan estimated that the economy needed to grow by 8.2 percent in the fourth quarter to attain the low end of the target.
“Even at 6 percent and 6.4 percent for next year is considered a very respectable achievement if you have seen those numbers, considering that even at 5.8 percent, the number in the first three quarters of this year is very respectable in the international community. We remain among the bright spots in the Asian region,” Balisacan said in a briefing on Wednesday.
The ADB, however, maintained its growth estimate for the Philippine economy at 6.4 percent in 2015.
The country’s economic growth next year, the bank said, will be driven by strong household consumption bolstered by steady growth in remittances and increases in domestic employment.
This can also be supported by a pick up in government spending, which was the main drag in economic growth this year. Higher government spending is expected next year following the start of election spending in preparation for the 2016 polls.
Balisacan said the increase in household consumption fueled by overseas Filipino worker remittances would boost the country’s fourth-quarter growth to above 5.3 percent.
In a year-end briefing on Wednesday, Balisacan said the economy needs to grow by 6.6 percent in the last quarter to attain a full-year growth of at least 6 percent this year.
“So far, the indicative numbers based on the available information at this time is expectedly better than the third quarter,” Balisacan said.
Balisacan added that another growth driver in the last three months of 2014 includes tourism. He said the country will likely achieve its 6.8 million tourism-arrival target this year.
Apart from this, the Comprehensive Rehabilitation and Recovery Plan ensured that construction and rehabilitation in the Yolanda corridor, particularly in the last quarter of 2014, will also provide a boost to growth.
Balisacan noted that resettlement projects account for the biggest slice of the proposed budget at P75.67 billion.
To this end, Balisacan said the Department of Budget and Management has released P51.98 billion from the national budget for the rehabilitation plan in the Yolanda corridor since November 2013.
Balisacan said growth in the last quarter of the year will not be affected by the damage caused by Typhoon Ruby (international code name Habagat) since it only amounts to around 0.03 percent of the country’s GDP.
He added that any damage caused by the typhoon in the agriculture sector will also have minimal impact on fourth-quarter economic growth because the farm sector only accounts for 11 percent of the country’s GDP.
“Considering our constant battle with climate-related disasters, along with the uncertainties in the global economy, we can say that the Philippine government has remained resolute in its stance to strengthen the foundations for sustained and inclusive growth through wide-ranging reforms in governance and the economy,” Balisacan said.
In the third quarter, the government’s underspending cut the country’s third-quarter economic growth to 5.3 percent. This was the slowest since the third quarter of 2011, when the economy grew 3.2 percent.
Balisacan said the chilling effect created by the unfavorable decision of the Supreme Court on the Disbursement Acceleration Program and the recent issuances of disallowance by the Commission of Audit were among the major factors that caused public spending to contract by 2.6 percent in the third quarter.
Balisacan said this chilling effect has also caused delays in various projects, including those targeted to be implemented in Yolanda-affected areas.
However, Balisacan said the negative impact on the government’s spending is a result of the institutional changes that the Aquino administration is implementing.
For the whole of Asia, the ADB said growth is expected at 6.1 percent in 2014, the same as in the previous year, but a slight downward revision from the 6.2-percent forecast in Asian Development Outlook 2014 Update.
The regional economy is projected to expand a bit more quickly in 2015 at 6.2 percent, but still 0.2-percentage-point short of the Update forecast.