ADB cuts Philippines growth outlook to 6% in 2024

MANILA, Philippines — The Asian Development Bank (ADB) has trimmed its growth forecast for the Philippines for this year, citing risks posed by extreme weather events that can drive up inflation and the slower growth in advanced economies.

The multilateral lender’s Asian Development Outlook (ADO) for April 2024 released yesterday showed the Philippines is expected to grow by six percent this year, lower than the previous target of 6.2 percent.

While the 2024 growth forecast was revised downward, the latest figure is faster than the 5.5 percent growth posted last year and within the government’s six to seven percent growth target for this year.

The ADB’s 2024 growth forecast for the Philippines, if achieved, would make the country the fastest growing economy, along with Vietnam, in Southeast Asia.

ADB principal country specialist Cristina Lozano said the growth forecast for the Philippines was downgraded due to the upside risk to inflation, with the extreme weather events likely to affect the country’s agricultural output and food prices.

“Food has a strong weight of nearly 40 percent in the consumer price index in the Philippines,” she said.

She said higher shipping costs caused by the disruptions in the Red Sea can also drive up prices of goods.

“The second reason (for the downgraded growth forecast is) mainly external headwinds coming from a slower growth in advanced economies that are very much in commercial relations with the Philippines, like the US, Japan, that weigh on the regional outlook in general, but also in the Philippines in particular,” she said.

For next year, the ADB is forecasting a faster gross domestic product growth of 6.2 percent for the Philippines, following an expected easing of monetary policy after a series of rate hikes from 2022 until October of last year.

The ADB’s 2025 growth forecast for the Philippines is below the 6.5 to 7.5 percent growth goal of the government.

If realized, the Philippines will have the highest growth rate along with Vietnam in Southeast Asia next year.

The ADB also said inflation in the Philippines may slow to 3.8 percent this year and ease further to 3.4 percent next year from the average of six percent in 2023.

“The Philippines’ growth momentum is picking up speed, driven by the government’s efforts to improve budget execution, mobilize additional revenue and pursue reforms to boost the investment climate. Investments on large public infrastructure projects, as well as much needed social services, will boost government expenditures and bode well for the economy in the long run,” ADB Philippines country director Pavit Ramachandran said.

While the Philippines has relatively strong economic growth, the ADB said in the report, investments in the country lag behind its neighbors.

The ADB said promoting greater private sector participation would be an important engine of growth and productivity in the Philippines.

Ramachandran said it would be extremely important to build on reforms aimed at making the Philippines a more attractive investment destination.

He said improving the ease of doing business, reducing red tape, streamlining some of the requirements for investments, as well as reducing some of the market barriers would help drive growth.

“Sustained investment in infrastructure, as well as human capital, I think, will be key for boosting growth,” he said.