The World Bank on Wednesday reduced its 2019 growth forecast for the Philippines to 6.5 percent from an earlier estimate of 6.7 percent, saying “the outlook for the global economy has darkened.”
The Washington-based multilateral lender predicted that annual growth in the Philippines would pick up to 6.6 percent in 2020 and 2021. It estimated that the country’s gross domestic product expanded 6.4 percent in 2018.
The Philippines is seen to remain one of the fastest growing economies in the East Asia and Pacific region this year, outperforming major economies such as China which is forecast to grow 6.2 percent; Indonesia, 5.2 percent; Malaysia, 4.7 percent; and Thailand, 3.8 percent.
“Growth in commodity-importing economies excluding China is moderating. In the Philippines, activity has slowed as surging inflation, capacity constraints, and currency pressures have prompted authorities to hike policy rates,” the World Bank said in the January 2019 Global Economic Prospects report.
The Philippine economy grew 6.1 percent in the third quarter, pulled down by accelerating inflation that resulted in the slowdown in household spending for the period.
Inflation hit a nine-year high of 6.7 percent in October, before moderating in the following months. It eased to 6 percent in November and 5.1 percent in December, bringing the full-year average to 5.2 percent, beyond the government’s target range of 2 percent to 4 percent.
Economic managers said the slowdown in inflation at the latter part of the year could be attributed to the immediate measures implemented by the government aimed to curb inflation.
“Growth among commodity importers is projected to moderate in 2019 as it converges with its potential rate. Excluding China, the 2018 growth outlook for EAP [East Asia and the Pacific] commodity importers has been downgraded because of a moderation in private consumption amid rising inflation in the Philippines,” the World Bank said.
Growth forecast for East Asia and the Pacific was reduced to 6 percent from an earlier estimate of 6.1 percent.
“East Asia and Pacific remains one of the world’s fastest-growing developing regions. Regional growth is expected to moderate to 6 percent in 2019, assuming broadly stable commodity prices, a moderation in global demand and trade, and a gradual tightening of global financial conditions,” it said.
Growth in China is expected to slow to 6.2 percent this year as domestic and external rebalancing continue. The rest of the region is expected to grow 5.2 percent in 2019 as resilient domestic demand offsets the negative impact of slowing exports.
Indonesia’s growth is expected to hold steady at 5.2 percent. The expansion of the Thai economy is projected to slow in 2019 to 3.8 percent.
“Global economic growth is projected to soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook,” the World Bank said.
“International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures,” it said.
Growth among advanced economies is forecast to drop to 2 percent this year, it said, while slowing external demand, rising borrowing costs and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies.
“Robust economic growth is essential to reducing poverty and boosting shared prosperity,” said World Bank Group vice president for equitable growth, finance and institutions Ceyla Pazarbasioglu.
“As the outlook for the global economy has darkened, strengthening contingency planning, facilitating trade, and improving access to finance will be crucial to navigate current uncertainties and invigorate growth,” Pazarbasioglu said.