THE Asian Development Bank (ADB) has lowered its Philippine growth forecast for this year, citing domestic and global headwinds.
The adjusted projection of 6.0 percent, down from 6.2 percent previously, falls at the bottom end of the government's downwardly revised 6.0- to 7.0 percent target for the year.
If achieved, it will also be better than the 5.6 percent expansion recorded last year.
"The growth outlook is subject to downside risks," the Manila-based ADB said in the April edition of its Asian Development Outlook.
ADB senior economist Cristina Lozano said "the upside risks to inflation and mainly how the extreme weather events affect agricultural production and food prices" were the main reasons for the revision.
"The second reason is mainly external headwinds coming from a slower growth in advanced economies," she added.
The ADB expects economic growth to pick up further to 6.2 percent next year. This is, however, below the government's 6.5- to 7.5-percent target.
The multilateral lender said that lower inflation and monetary easing could spur the country's growth prospects, along with an expected increase in government spending as efforts to improve budget execution and procurement continue.
ADB Country Director Pavit Ramachandran said inflation was likely to temporarily accelerate above the 2.0- to 4.0-percent target in the second quarter but then revert by the second half.
Consumer price growth is expected to average 3.8 percent this year and then further decline to 3.4 percent next year.
"[W]e are continuing to monitor inflationary pressures ... weather-related disturbances, climate risks ... we're seeing the heat stress already now," Ramachandran said.
As for interest rate cuts, "I think the BSP (Bangko Sentral ng Pilipinas) stance will also depend on how the Fed (US Federal Reserve) starts moving policy ... and if they start easing, I think that will also have a bearing on what happens here [in the Philippines]."
Should inflation continue to stay within the central bank's target for the year, Ramachandran said that policy rate cuts could start in the second half of 2024.
The BSP's benchmark rate currently stands at a near 17-year high of 6.5 percent following the 450 basis points hike beginning May 2022 as inflation surged in the wake of Russia's invasion of Ukraine.
BSP Governor Eli Remolona has said that the central bank would only start easing if inflation was firmly anchored.
On Monday, he said that bad news on the price and growth fronts could delay rate cuts to the first quarter of 2025.
The ADB, meanwhile, highlighted the role of the private sector in driving growth and productivity.
Aside from generating jobs, contributing to government revenues, and driving innovation, "private sector participation in infrastructure helps reduce pressure on public finances and encourages greater expertise in designing and managing infrastructure projects," the ADB said.
Increasing private investment in important sectors like green and resilient energy is also crucial for improving the business environment, it added.
Energy self-sufficiency in the Philippines will likely decline, the ADB noted, as natural gas supplies from the Malampaya gas field decrease.
"The clean energy transition will require planning to replace and decommission fossil fuel-based power plants, and explore opportunities to develop geothermal, offshore wind, and floating solar capabilities," it continued.
This will also necessitate investments in energy storage, transmission systems, and grid resilience to support an expansion in renewable energy sources.
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