ADB scales down Neda’s ‘impossible dream’

The Asian Development Bank has scaled down its economic-growth forecast for the Philippines as President Aquino’s administration starts to take stock of its performance as an economic manager in the twilight quarter of his term.

In the ADB’s outlook supplement released on Wednesday, the Philippine economy didn’t come out with flying colors as a star performer in Southeast Asia, disappointing the administration’s economic managers who have sought to leave a brilliant legacy of economic expansion under its watch compared with the performance of the Philippines’ neighbors.

In a statement accompanying the supplement, ADB chief economist Shang-Jin Wei noted that “growth in the first three quarters of this year was somewhat softer than we had expected,” prompting the bank to revise its growth projections amid an economic slowdown in the region that was believed to have dragged down the Philippines’ growth rate. The forecast for the Philippines this year is claimed to have reflected the “general weakness in the region.”

The revised ADB growth projections forecast gross domestic product (GDP) of 6.1 percent in 2014, down from 6.2 percent in September, and 6.2 percent in 2015, down two-tenths of a point from the previous projection. The Philippines is expected to grow at a lower 5.8 percent in 2014, down from the September forecast of 6 percent.

“Robust private consumption and higher private investment and net exports were insufficient to balance unexpectedly weak public spending,” the ADB report said, echoing criticisms that the government’s PPP (public-private partnership) infrastructure spending program was not driving desired economic growth targets. The growth forecasts for most of the Southeast Asian economies were also trimmed down, including Indonesia, Thailand and Singapore, which were now seen to be slower than first expected.

Malaysia upstaged the Philippines’ performance, dislodging it as the region’s top performer. Vietnam is expected to perform better than in the previous forecast.

ADB Outlook 2014 reports that growth in developing Asia lost some momentum but was still in line with the Outlook 2014 update. The bank sees the region as expanding by 6.1 percent in 2014, and a slight pickup of 6.2 percent in 2015.

The 2014 and 2015 GDP growth forecasts for most of the Southeast Asian economies were trimmed, bringing down growth projections for the region as a whole. Southeast Asia’s aggregate GDP is projected to expand by 4.4 percent in 2014 and 5.1 percent in 2015, revised down from 4.6 percent and 5.3 percent in the Update. After the GDP in the Philippines rose by 6.1 percent in the first half, growth slowed and fell back to 5.3 percent in the third quarter. Robust private consumption and net exports were insufficient to balance unexpectedly weak public spending.

As growth in the first nine months of the year reached only 5.8 percent, the 2014 GDP is downgraded by 0.2 percentage points to 6.0 percent. Continued household consumption bolstered by steady remittances from overseas Filipino workers and increases in domestic employment will, along with improved government, support a pickup in growth next year and the Update’s growth forecast of 6.2 percent for 2015.

Despite this highly-hedged Update assessment, the Philippines’ economic managers continued to seek refuge behind it, with the argument that the administration is not to blame and responsible for the slowdown of the economy because it was merely dragged down by externally-induced regional economic performance.

Despite these economic restraints, the National Economic and Development Authority has continued to cling tenaciously to delusional hopes that higher economic growth in the fourth quarter would compensate for the “disappointing third-quarter performance.”

Neda Director General and Socioeconomic Planning Secretary Arsenio Balisacan told reporters in a briefing on Wednesday that fourth-quarter GDP was “expected to be better.” He discounted the effect of the devastation of Typhoon “Ruby” (international name: “Hagupit”) on the economy. He said the impact of Ruby on the agricultural sector was “very negligible”—only around 0.02-0.03 percent of GDP—and pointed out that the share of agriculture in the GDP was very small at only 11 percent.

According to Balisacan, the economy must grow at 6.6 percent full-year growth, while a higher 8.6-percent fourth-quarter expansion is needed to hit the lower end of the government’s 2014 GDP goal of 6.5-7.5 percent. He had earlier said that the government remained hopeful of at least 6.7 percent in 2014 and admitted that the target had become “very challenging.”

“There are bright prospects to look forward to as the year ends,” Balisacan said, adding that “our macroeconomic fundamentals remain strong…”

Apart from citing this well-worn economic nostrum, he did not demonstrate or offer any hard data on how the target is attainable beyond being an impossible dream.