MANILA (Mabuhay) – The World Bank on Monday upgraded its economic growth forecast for the Philippines for this year, seeing nearly seven percent growth over the next two years.
In its East Asia and Pacific Economic Update, the Washington-based lender said the Philippine economy, as measured by its gross domestic product (GDP), would grow by seven percent this year, up from an earlier projection of 6.2 percent made last May.
Philippine GDP grew by 7.6 percent in the first half of the year, exceeding the government’s target of 6-7 percent for the entire 2013.
“Amid the challenging global environment, the Philippines is expected to sustain higher growth in the medium term,” the World Bank said.
For 2014, the lender forecast growth of 6.7 percent, also higher than the previous forecast of 6.4 percent. In 2015, GDP growth is expected to pick up to 6.8 percent.
The World Bank said private consumption, which comprises over 70 percent of GDP, would continue to drive overall growth on the back of sustained remittances and the expansion of the business process outsourcing (BPO) industry.
The doubling of infrastructure spending from 2.5 percent of GDP to five percent by 2016 would drive growth of government consumption, and both public and private investments.
Downside risks to growth include a slower global recovery, uncertainties in advanced economies as the US Federal Reserve removes its economic stimulus, potential asset bubbles in the real estate sector and domestic reform lags.
“Protracted economic slowdown and financial market volatility in high-income countries could slow growth through weaker external demand and large capital outflows,” the lender said.
Going forward, the World Bank urged the government to focus on generating higher, sustained and more inclusive growth – the type that creates more and better jobs and reduces poverty.
“The challenge of sustaining growth and creating more and better jobs will have to focus on raising the productivity of the majority of the country’s workers, which requires increasing overall investments in human and physical capital,” the lender said.
According to World Bank lead economist Rogier van den Brink, the Philippines’ strong macroeconomic fundamentals – characterized by low and stable inflation, healthy external balance and stronger government finances – have shielded the country from the persistent weaknesses in the global economy.
As the recovery picks up in the US, Japan and the Euro zone, with growth accelerating in the second quarter of 2013, developing countries in East Asia stand to benefit because of their high trade shares in the economy, the World Bank said, while adding that they need to be better prepared for potentially disruptive adjustments.
“East Asia Pacific continues to be the engine driving the global economy, contributing 40 percent of the world’s GDP growth – more than any other region. With overall global growth accelerating, now is the time for developing economies to make structural and policy reforms to sustain growth, reduce poverty and improve the lives of the poor and vulnerable,” Axel van Trotsenburg, World Bank East Asia and Pacific regional vice president, said.
For developing countries in the East Asia and Pacific, the World Bank projected 7.1 percent growth for 2013 and 7.2 percent in 2014.
Excluding China, the region is expected to grow at 5.2 percent in 2013 and 5.3 percent in 2014. (MNS)