Philippines to grow 6.9 percent in 2017, 2018: World Bank
The Philippine economy may expand at 6.9 percent this year and in 2018 due to government's commitment to further increase public infrastructure investment, the World Bank said on Tuesday.
The new projection was slightly lower than the 7.0 percent estimate in December.
But Birgit Hansl, World Bank lead economist, said in a press conference in Taguig City, the revisions to the World Bank's forecast compared to December's were minor or "statistically insignificant."
"Supported by sound domestic macroeconomic fundamentals and an accelerating recovery among other emerging markets and developing economies, the Philippines is expected to remain one of East Asia's top growth performers," she said.
The Washington-based lending agency sees gross domestic product to grow by 6.8 percent by 2019.
Hansl said the government's commitment to increase public infrastructure investment is expected to sustain growth momentum through 2018 and reinforce business and consumer confidence.
The Duterte administration is eyeing an increase in infrastructure spending by 5.4 percent of GDP for this year. It aims to improve expenditure on infrastructure to about P8 trillion by the end of President Rodrigo Duterte's term in 2022.
Hansl said the country’s strong growth in 2012 to 2015, accompanied by job creation and a declining number of people living in extreme poverty means "growth is becoming more inclusive."
Some 1.8 million Filipinos were out of poverty in recent years, she said, citing higher employment, low inflation and improved incomes contributed to the decline in the number of poor people.
Hansl cited several important downside risks to growth prospects.
On the external front, she said rising global interest rates could weaken the peso, adversely affecting capital flows to the Philippines and driving up domestic inflation.
Commodity prices, specifically global crude oil prices, are projected to rise in 2017, she added.
On concerns regarding protectionist policies of the administration of United States President Donald Trump which could affect business process outsourcing in the Philippines, the World Bank official said, "it is not something that is specific only to the Philippines."
"So, it is something that any country should be vigilant about and makes even more reason to really try to diversify services, export itself and find new markets and also find a better way to integrate to the global value chain where, by the way, the distinction between goods and services exports comes pretty much indistinguishable," she explained.
On the domestic risk, Hansl stressed the need for the realization of the administration's planned tax reforms.
"Strong macroeconomic fundamentals have opened some fiscal space for the government to implement its public investment and social spending agenda, but the success and timeliness of the administration's planned tax reforms will be vital to preserve fiscal sustainability," she said.
The proposed comprehensive tax reform package is still pending in Congress.
Failure to pass this year the proposed tax measure would not have an impact yet on the World Bank's growth projection, Hansl said. But she added her agency could include this in their next growth projection during the second semester of this year.
Despite the political noise and Duterte's expletive-laden pronouncements against other countries, Hansl said, "we see continued investors' confidence" in the Philippines.
She also said the Philippines could take advantage of several development opportunities such as the very young population, which provides the promise of a demographic dividend period, if structural reforms facilitate savings and investments and allow skills development for young workers. Celerina Monte/DMS