Buoyant private consumption and a rebound in government spending in the Philippines drove strong economic growth in 2012. A rise in net exports also contributed to the growth in gross domestic product (GDP). Robust expansion is projected over the next 2 years, based on buoyant consumption and an improvement in investment. Inflation is moderate and expected to remain so. The challenge is to translate solid economic growth into poverty reduction by generating more and better jobs.
Sustained growth in private consumption, a recovery in government spending, and positive net exports lifted GDP growth to 6.6% in 2012, or 4.8% in per capita terms. Inflation eased to a 5-year low, and external accounts were healthy.
Private consumption rose by 6.1% and contributed the most to GDP growth from the expenditure side. Buoyant consumption was driven by higher remittances from overseas Filipino workers, a slight gain in employment, and low inflation.
Remittances increased by 6.5% to $23.4 billion (up by 3.8% in strengthening Philippine pesos).
Government spending rebounded from the low levels seen in 2011, when governance reforms slowed budget disbursements. Higher spending on public infrastructure, alongside expansion in private construction and investment in equipment, pushed up fixed capital investment by 8.7%
Selected Economic Indicators (%) - Philippines
Current account balance (share of GDP)
Source: ADB estimates.
The forecasts for the Philippines assume that the government makes further progress on reforms to improve the investment climate and that legislative elections in May 2013 go smoothly.
GDP growth is forecast at 6% for this year, with a similar pace anticipated in 2014. Growth in remittances and services exports will contribute to current account surpluses of around 3% of GDP.
Source: ADB. 2013. Asian Development Outlook...