ADB sees “fairly robust” growth for the Philippines, and other Asian emerging economies this year

In assessing the growth prospects this year of the emerging Asian economies, the Asian Development Bank (ADB) has tempered its optimism with caution although it expects a “fairly robust” growth of an average of 7% this year for the region.

In a press briefing last Thursday after his courtesy call on Philippine President Benigno Aquino III in Malacanang, ADB President and Chairman Haruhiko Kuroda said the bank is ” cautiously optimistic” on the emerging Asian economies over the short term due to rising oil prices and the still volatile European financial situation.

According to Mr. Kuroda, although there could still be some slowdown compared with Y’s 2010 and 2011, “still we expect a fairly robust growth in Asia, particularly emerging Asia or developing Asia and average growth rate could be 7 or 7% plus.”

Mr. Kuroda said that a 7% growth rate was “still quite a high respectable rate of economic growth” in the region.

For the Philippines, mr. Kuroda said, the country is expected to grow by 5% this year, and 6 to 7% in the medium and long term.

Last year, the Philippines had a dismal full-year growth of only 3.7%, much lower than the government forecast of 4.5 to 5.5%.

Earlier, the International Monetary Fund (IMF) has cut also its growth projection even for the better-performing ASEAN region, which includes the Philippines, citing a mild recession likely to happen in Europe this year that may dampen growth of other areas.

The IMF now sees the ASEAN 5, composed of the Philippines, Indonesia, Malaysia, Thailand and Singapore, posting an average growth of 5.2% this year and 5.6% in Y 2013 on the back of the prolonged crisis in the EuroZone.

In its previous forecast, the IMF said the ASEAN 5 could grow 5. 6 and 5.8% this year and next.

“The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated,” the IMF said in its latest World Economic Outlook.

Despite the bleak outlook of the IMF, Philippine stocks Friday hit a record high, breaching the 5,000-pt level. This has prompted President Aquino to remark that the Philippines is poised for an economic takeoff.

“The stock market is the clearest indicator and fastest reacting business indicator to show business confidence,” an elated President Aquino told reporters after inaugurating a mini hydroelectric plant in Calapan City, south of Manila.

The main Philippine Stock Exchange (PSE) index rose 1.57%, or 77.69 pts, to close at an all-time high of 5,016.30 Friday.

Mr. Kuroda has also some positive remarks about the Philippine economy, saying it “is in some sense balanced.”

He said that while the Philippines is an exporter, it “is not” excessively dependent on export, particularly export to the US and Europe.”

Mr. Kuroda cited the strong services sector in the Philippines which is not just confined to business-process outsourcing but also to the financial, distribution, and real-estate sectors.

On top of that, Mr. Kuroda said, the Philippine economy is further supported by remittances from its migrant workers, which is equivalent to 10% of gross domestic product (GDP), and still rising.

“So we expect that the Philippine economy will continue to grow not just depending on one item but on multiple items, exports, consumption, investments and so on and so forth,” Mr. Kuroda said.

Mr. Kuroda went on to say that for the Philippines to continue its accelerated growth path, it must have better infrastructure and improved government.

“The potential of the Philippine economy is very strong and in the coming years and decades, the Philippine economy can maintain and even accelerate economic growth,” Mr. Kuroda said.

He said the Philippines is rich in human and natural resources, and, with the exception of Singapore and Malaysia, has “the most developed and the best higher education” in Southeast Asia,? ” although it requires further improvement in the coming years.”

Mr. Kuroda also commended the Aquino administration for its focus on government reforms, which he said “include reforms covering Key aspect of public policy that will build an important foundation for social and economic progress.”

“Good governance is essential for ensuring sustained inclusive growth and creating an environment for a competitive private sector,” he said.