The forecast for growth in the Philippines in 2015 is trimmed from Asian Development Outlook 2015 report. However, growth is projected to quicken in 2016.
|Selected economic indicators (%)||2015||2016|
|ADO 2015||Update||ADO 2015||Update|
|Current Account Balance (share of GDP)||4.0||3.7||3.6||3.6|
Household consumption accelerated in the first half on 2015, driven by higher employment, low inflation, and rising remittances. Private investment also rose, but government spending was sluggish early in the year before rebounding. Net external demand weighed on Gross Domestic Product growth, which slowed to 5.3%.
The rebound in government spending is expected to spur growth through the rest of this year and in 2016. In July, growth in public expenditure excluding interest accelerated to 31% year on year. Election-related spending will also support domestic demand through May 2016, when elections will be held.
Private consumption and investment are expected to maintain solid growth in 2016. Inflation forecasts are revised down in light of unexpectedly low inflation so far this year, averaging 1.7% in the first 8 months, and the assumption that global oil prices will increase only slightly in 2016 and that global food prices will be stable.
Upward pressure on inflation could come from drought induced by El Niño if it damages crops and reduces hydropower supplies. Merchandise exports fell by 12.9% in US dollar terms in the first half and imports fell by 8.3%. The trade deficit widened but growth in remittances and services exports, mainly from business process outsourcing and tourism, kept the current account in surplus.
This Update trims the forecast for the current account surplus in 2015 due to the weakness in merchandise exports. It maintains the current account forecast for 2016.
Excerpted from the Asian Development Outlook 2015 Update.