MANILA, Philippines - The World Bank has scaled down its growth forecast for the Philippines this year and next, citing increased risks caused by global economic uncertainties and the impact of natural disasters.
From an earlier growth rate of five percent, the World Bank said Philippine economic growth will slow to a modest 4.2 percent in 2011. For 2012, the economic growth outlook has likewise been lowered to 4.8 percent from the original 5.4 percent.
“Key downside risks to growth remain – increased global uncertainties and a slowdown in investments. Portfolio investment inflows are expected to remain strong, but foreign direct investments (FDI) is projected to moderate as foreign investors have become more cautious,” the multilateral lending agency said in its latest East Asia and Pacific Economic Update.
It further urged the National Government to increase spending for the infrastructure sector and attract private investment that “will help the country ride out the global turbulence brought about by the eurozone crisis and the fiscal woes of the United States.”
The World Bank, however, pointed out that the Philippines has been benefiting from relative political stability and an improved fiscal position.
It added that private consumption will still be buoyed mainly by remittances, expected to grow between six to eight percent this year. The current account surplus is projected to remain in healthy surplus, driven by sustained remittance inflows amid a larger trade deficit as imports pick up.
The World Bank said the challenge for policymakers is to ensure that the Philippines continue to improve its competitiveness, while cushioning the economy from adverse external shocks.
“To strengthen the country’s resiliency to external shocks, the government needs to accelerate public spending, and raise more revenues through improved tax administration and policy reforms,” it said.
The Philippines, nonetheless, is well-positioned to cope with any new financial shock that might evolve from the current global turmoil, the World Bank added.
The report cited other positive factors such as the conservative stance of the financial sector throughout the preceding decade that has helped ensure a healthy balance sheet for the country.
But it noted that the Philippines needs to have more investments in key sectors such as productive infrastructure, education and social protection. “In the Philippines, the quality of urban and rural infrastructure is a major constraint, including roads, ports and airports.”
“The government is accelerating the implementation of its public investment and PPP (Public-Private Partnership) programs. Mobilizing private sector resources - technical, managerial and financial - to boost delivery of essential economic and social services and infrastructure is a step in the right direction,” Chiyo Kanda, World Bank acting country director, said.
Last September, the Asian Development Bank (ADB) revised its Philippine economic growth outlook to 4.7 percent for 2011, from a more moderate five percent. However, it retained its 5.1 percent growth outlook for 2012. - By Ted P. Rorres
