The World Bank on Thursday reduced the 2019 growth forecast for the Philippines to 5.8 percent from the previous estimate of 6.4 percent amid the rising global uncertainties.
It also revised downward the 2020 growth forecast to 6.1 percent from 6.5 percent. The bank said in its Philippine Economic Update that growth would slightly pick up to 6.2 percent in 2021.
“Weakening global economy, rising protectionism, the United States-China trade spat and the slowdown in public investments in the Philippines in the first half of the year have tempered the country’s growth prospects,” the bank said.
It said, however, that strong private consumption linked to lower inflation, higher employment rates, robust remittances and rising wages and a recovery in public investment spending would keep the economy buoyant. The services sector is seen to drive growth fueled by the continuing expansion of financial services and tourism.
“Given the global environment, resuming the fast pace of expansion in infrastructure and human capital spending will be key for the Philippines to regain higher growth momentum while continuing to lay the foundation for greater inclusion,” said Mara Warwick, World Bank country director for Brunei, Malaysia, Thailand and the Philippines.
“Timely passage of the 2020 budget and decisive action on the country’s tax reform program will remove uncertainties and help the private sector make timely decisions, boosting job creation,” Warwick said.
The report said the Philippines would sustain progress in reducing poverty despite the temporary slowdown in economic growth in the first half of 2019. More workers are finding gainful employment outside agriculture, real wages are rising, and inflation rates are stabilizing. It said the continuing implementation of social programs like the Pantawid Pamilya, or 4Ps, contributed significantly to poverty reduction.
Using the World Bank’s $3.2-a-day poverty rate, the poverty incidence is estimated to have declined from 26 percent in 2015 to 20.8 percent in 2019, a result of growth of incomes among poor households. The poverty rate is expected to dip further to 19.7 percent in 2020 and 18.7 percent in 2021.
“In the medium term, accelerating implementation of high-impact infrastructure projects and the recently approved critical reforms like the Ease of Doing Business Law and liberalization of the rice trade will help the country sustain inclusive growth that generates high-paying jobs and reduces poverty,” said World Bank senior economist Rong Qian.
Qian said the passage of investment-friendly reforms such as amendments to the Public Service Act to allow foreign ownership in key sectors including telecommunication and transportation services, and the Retail Trade Liberalization Act that would allow greater competition in the retail trade sector, could attract more foreign direct investment and boost local productivity.
The World Bank also said the growth in developing East Asian and Pacific economies was expected to slow from 6.3 percent in 2018 to 5.8 percent in 2019 and to 5.7 and 5.6 percent in 2020 and 2021, respectively, reflecting a broad-based decline in export growth and manufacturing activity.
It said that downside risks to the region’s growth prospects had intensified. Prolonged trade tensions between China and the United States would continue to hurt investment growth, given high levels of uncertainty, it said.
A faster-than-expected slowdown in China, the Euro Area and the United States, as well as a disorderly Brexit, could further weaken the external demand for the region’s exports, the World Bank said.
