By Joann Villanueva/PNA
MANILA — Higher public infrastructure spending along with sound macroeconomic policies, among others, emboldened economists of the Manila-based Asian Development Bank (ADB) to forecast a 6.4 percent growth for the Philippine economy both for 2019 and 2020.
The projection for the current year is higher than the economy’s 6.2 percent Gross Domestic Product (GDP) output last year but lower than the lender’s earlier projection of 6.7 percent.
ADB Country Director for the Philippines Kelly Bird attributed the higher growth projection to robust private and public spending.
He said the government’s infrastructure program, the inflows from Filipino workers overseas as well as the business process outsourcing (BPO) sector help keep economic growth strong.
“Philippines has a major infrastructure spending program that’s keeping economic growth well above the other neighboring countries,” he said.
The Philippines is among the three Southeast Asian countries that the ADB, based on its Asian Development Outlook (ADO) 2019 launched Wednesday, that have higher growth projection compared to its 2018 output.
The other two are Brunei Darussalam at 1 percent from -1 percent last year and Myanmar, from 6.2 percent last year to 6.6 percent this year.
Risks, however, remain but Bird said these are largely from external factors, such as the slower global growth.
He also discounted the possibility of a significant impact by the delayed approval of the 2019 national budget, noting that this will only be felt in the first quarter’s output since the government has been investing heavily on infrastructure and the people, both of which has long-term effects on the economy.
“I think what’s important is that the budget gets approve and that the government can give the contract with its spending program,” he said, noting that spending has been aligned with the program set by the current administration.
Bird said additional allocation for infrastructure program and on people are critical in ensuring the economy’s long-term growth and making this an inclusive one.
And while the government has been tapping official development assistance (ODA) to help finance its infrastructure program, the ADB official said this is still a small portion of the funds compared to what the government has programmed.
He explained that what is beneficial from the ODA is the innovation that the provider brings in.
He added that ratio of the national government’s debt to GDP has declined to just 42 percent of GDP.
“That shows us, that tells us that the government has fiscal space to spend on infrastructure, to spend on the social sector,” he said.
Relatively, ADB forecasts inflation to average at 3.8 percent this year, within the government’s two to four percent target band from 2018 to 2022.
Last year, the country experienced elevated inflation rates due to supply-side factors, with the peak registered in September and October at 6.7 percent. Average inflation last year stood at 5.2 percent.