The Asian Development Bank (ADB) on Tuesday forecasted that the Philippine economy would expand only 2.5 percent in 2009, far lower than the government's growth target of 3.7-4.4 percent, as the impact of the global financial crisis deepened.

In its annual economic publication, Asian Development Outlook 2009, the Manila-based regional lender said domestic consumption is projected to grow by just 3 percent, as remittances from overseas Filipino workers, a pillar of the Philippine economy, are likely to stagnate in US dollar terms on the back of a weak global labor market.

In addition, the local labor market is also bleak as export industries trim their workforce and more laid-off overseas workers return home, ADB said, adding that domestic and foreign private investment is expected to remain sluggish this year because of the weak demand for exports and the global credit squeeze.

"Similar to other countries in Southeast Asia, the near-term challenges for the Philippines are twofold: safeguarding the achievements of recent years among them stronger growth momentum and progress in fiscal management and protecting the most vulnerable groups in society at risk during the slowdown," says ADB Acting Chief Economist Jong-Wha Lee.

The ADB forecasts the Philippine economy to recover slightly to 3.5 percent in 2010, assuming that the global economy and trade pick up late next year.

It said domestic risks to the outlook include delays to the economic stimulus package and capacity constraints that could hamper implementation of stimulus-related projects.

The Philippine economy grew at its fastest pace in three decades of 7.2 percent in 2007 but was significantly pulled back by the global financial crisis to 4.6 percent in 2008. Government economic officials said they were confident of the resiliency of the economy as local bank exposure to the US crisis is limited while the country depends more on overseas remittance rather than exports to sustain growth.

(Xinhua News Agency March 31, 2009)