ADB sees Philippine growth at 6%, will lend $750M

The Asian Development Bank expects the Philippine economy to grow 6.0 percent this year, citing that the country will not be affected too much by a volatile global environment to be caused by a US recession.

The ADB, one of the Philippines' biggest sources of concessional loans, expects growth in Thailand at 5.0 percent, in Singapore at 5.2 percent and in Malaysia at 5.4 percent. It projects 6.0 percent in Indonesia, 7.0 percent in Vietnam, 7.7 percent in Laos and 7.5 percent in Cambodia.

The ADB has committed to support the Philippine government's goal of sustaining development and said it would set aside $750 million for lending to the Philippines this year, up 28 percent from $583.8 million allotted in 2007. The ADB allocated $175 million for the Philippines in 2005 and $650 million in 2006.

In its 2008 outlook for Asian economies, released Wednesday, the ADB said investment in the Philippines "is expected to expand in 2008. Improved fiscal position is allowing the government to raise investment in much-needed infrastructure."

Tom Crouch, ADB deputy director general for Southeast Asia, said in a news briefing that the Philippines and many countries in the region would not be substantially affected by weakening demand in the United States and other industrialized countries.

The Philippines will feel the impact of a global slowdown, as the United States accounts for close to one-fifth of Philippine export earnings, but the effect will not be "worrisome," he said."

Private consumption will remain a major growth driver this year," Crouch said. "However, high food and fuel prices will force consumers to reduce their discretionary spending."

The Philippines posted a 2007 growth of 7.3 percent expansion. For 2008 the government is aiming for 6.3-7.0 percent. The ADB projection of 6.0 percent is higher than those of many foreign investment banks and the World Bank's 5.9 percent.

Crouch said a challenge for the Philippines this year would be the government's ability to sustain gains on the fiscal front.

He noted that "many economists and developmental partners" regard the government's ability to balance its budget this year "as the litmus test as far as credibility is concerned. The government has already established credibility, but it is important to sustain this."

But he added that it was equally important for the government to respond to calls for higher spending for social services and infrastructure, especially given a tough external environment. He agreed that increasing public spending was needed to help the domestic economy cushion the effects of a global slowdown.

Crouch said increasing public spending should be matched with increasing revenue collection so as to avoid fiscal slippage.