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ADB projects PH GDP growth to remain strong at 6.4% in 2014

The Asian Development Bank (ADB) is projecting that the Philippine economy will grow by 6.4 percent this year on the back of strong remittance inflows and positive consumer sentiment.

In its latest economic publication Asian Development Outlook 2014, the Manila-based lender expects the country’s gross domestic product (GDP) will grow at a much slower pace this year from 6.7 percent last year.

The ADB’s forecast is also below the government’s GDP target of 6.5 percent to 7.5 percent but is more or less similar to the 6.5 percent growth for the country projected this year by the International Monetary Fund.

But while the bank sees a slower GDP, Juzhong Zhuang, ADB deputy chief economist explained the country’s economic expansion for this year will still outperform its average growth rate of 4.7 percent from 2008 to 2012.

Zhuang, however, noted the key challenge is to find ways to turn the country’s strong performance into employment that will help to further reduce poverty and support inclusive growth.

ADB said private consumption will remain to benefit from remittance from overseas Filipinos and positive consumer sentiment this year. But, higher inflation and interest rates will temper the pace of growth in consumer spending.

Likewise, the bank cited the rehabilitation and reconstruction efforts in the areas affected by super-typhoon “Yolanda” and earthquake last year as an additional boost to the economy until late this year and 2015.

“The direct and timely transfer of national government resources to local governments and affected communities has been hindered by highly centralized national government systems. Also, regional and local administrations have limited capacity to implement reconstruction and rehabilitation programs,” ADB said.

“These matters are being addressed, which could accelerate work in the affected areas,” it added.

The ADB has estimated the regions that were struck by the super-typhoon contribute around 17 percent of the country’s GDP from 2010 to 2012, with Eastern Visayas, the worst hit, accounting for 2.5 percent of the annual output.

At the same time, the ADB noted there are positive signs for continued growth in investments.

“Improved business confidence and rising inflows of foreign direct investment will support private investment. Confidence has been reinforced by the achievement last year of investment grade sovereign credit ratings and improvements in several global competitiveness indices,” ADB said.

The manufacturing is expected to continue to perform well this year, on the back of strong domestic demand and improvement in exports as demand from the United States and Europe picks up.

The report noted that manufacturing grew 10.5 percent in 2013, but still accounts for a small share of the Philippines’ GDP and employment.

Also, the construction sector is expected to remain buoyant, as the government undertakes more infrastructure projects this year.

The ADB noted that growth in services, which accounted for 57 percent of the economy in 2013, will be driven by expansion of the business process outsourcing (BPO) sector and tourism.

Meanwhile, the International Monetary Fund (IMF) has raised its GDP forecast for the Philippines this year to 6.5 percent amid an expected increase in domestic demand and imports as the country embarks on massive rehabilitation of typhoon ravaged regions.

The revised growth figure, while higher than its January projection of 6.3 percent, is at the low end of the government target of 6.5 percent to 7.5 percent.