The World Bank on Wednesday kept its 2022 growth outlook for the Philippines at 5.7 percent anchored on more robust domestic activities despite intensifying global uncertainties.
It also predicted annual growth of 5.6 percent in 2023 and 2024 for the country, but said domestic and external headwinds may negatively impact these projections.
The Philippines grew 8.3 percent in the first quarter, fueled by strong domestic demand and the recovery of industry and services sectors.
“Continuing growth this year will draw strength from an improving domestic environment, characterized by low COVID-19 cases, greater mobility of people and wider resumption of economic and social activities,” the World Bank said in its Philippines Economic Update.
World Bank senior economist Kevin Chua said in an online briefing the “growth outlook for the Philippines remains positive but subject to downside risks.”
Chua noted the upward trajectory of inflation, the ongoing war between Russia and Ukraine, the monetary policy normalization in the US, slowdown in China and the lingering risks posed by the COVID-19 pandemic.
Inflation in May accelerated to a 42-month high of 5.4 percent from 4.9 percent in April, driven by higher prices of food, non-alcoholic beverages and transport, the Philippine Statistics Authority said.
The World Bank said the reopening of the economy shored up services, especially transportation, restaurant and food services and wholesale and retail trade.
It said prospects improved for tourism following the opening of border to vaccinated individuals, reopening of tourist attractions and relaxed travel requirements for travelers. Sustained public investments, along with recovering business activities, will boost construction and industry sectors, it said.
“Continuity of reforms in the last six years promoting greater competition and attracting foreign investments will further boost the country’s growth outlook in the coming years,” said Ndiamé Diop, World Bank country director for Brunei, Malaysia, the Philippines and Thailand.
“In the context of narrowing fiscal space, the authorities can encourage public-private partnerships to sustain improvements in the country’s infrastructure assuming financial risks to the government are managed and the quality of services for the citizens are secured,” Diop said.
Diop said developing measures to reduce budget deficit and the country’s debt would ensure long term fiscal sustainability. These measures should focus on prudent spending, improved revenue collection through reforms in government procurement, and greater private sector financing to ensure that government allocations for education, health, other social services and infrastructure are not sacrificed, he said.
The World Bank flagged several risks to the outlook, including rising inflation, geopolitical uncertainty brought about by the Russian invasion of Ukraine, tightening global financing conditions and weaker growth of trading partners like the United States and China.
It said while the Philippines entered a benign phase of the pandemic, the threat of a new variant-driven surge also hangs over the growth outlook.
It said the prolonged war in Ukraine and the continuing sanctions on Russia could further disrupt global economic activity, slow down growth of major economies in the world and impair trade and financial flows.
World Bank senior economist Kevin Chua said taming inflation is a pressing concern as it could dampen consumption and worsen poverty.
Estimates of the direct effects of prices variations on poverty showed that a 10-percent increase in the global price of cereals would raise the poverty headcount by 1 percentage point, pushing an additional 1.1 million Filipinos into poverty.
An increase of 10 percent in energy prices is estimated to raise the poverty headcount by 0.3 percentage points, equivalent to an added 329,000 Filipinos into poverty.
“Authorities have to use all available policy tools to address inflation, including monetary measures to prevent the de-anchoring of inflation expectations, and supply-side measures such as importation and lower tariffs and non-tariff barriers for important commodities to help augment domestic supplies as needed, and greater support to agriculture production through extension services, seeds, and fertilizer,” said Chua.