DUBAI: The World Bank has downgraded on Monday its growth outlook for the Philippines this year and 2019, but remained positive despite internal and external factors that could affect economic expansion.
“Amidst lingering global and local uncertainties, the Philippine economy is poised to grow at 6.4 percent in 2019 and 6.5 percent in 2020 and 2021” the World Bank’s Philippines Economic Update said.
The new estimates were lower than previous forecasts of 6.5 percent growth in 2019 and 6.6 percent in 2020 released in January this year, according to the Bank, “owing to several factors including the delay in the 2019 budget approval and the slowing down of global trade that can lead to weaker demand for Philippine exports.”
“The country’s growth outlook remains positive,” said World Bank Country Director for Brunei, Malaysia, Philippines and Thailand Mara K. Warwick. “Higher private consumption due to lower inflation, steady growth of remittances, and election spending will fuel growth this year. Growth in public investment will be tempered in the first half of 2019 but is expected to recover in the second half of the year.”
The Philippine economy has historically been driven by private consumption, mostly funded by the remittances of over 10 million overseas Filipino workers, with households contributing more than two-thirds of aggregate expenditures.
High inflation last year however temper consumption growth to 5.6 percent, from 5.9 percent a year earlier. It is expected to rebound in 2019 on lower inflation and continued job generation.
The World Bank report flagged several internal risks that could affect the Philippines’ overall growth prospects, including the delay in the approval of the 2019 budget and a looming drought.
A reenacted budget limits the government’s ability to implement new programs and projects, thus affecting public investment. The El Niño weather phenomenon meanwhile could cause several months of dry spell and reduce farm output, and thus result into higher food prices.
Among the external factors, the Bank raised concerns about the potential escalation of trade tensions between the US and China, a weak demand for the country’s exports and a strengthening in the US dollar.
“In the short term, key priorities for sustaining the Philippines’ rapid and more inclusive growth include prudently managing fiscal and current account balances and preserving consumer and business confidence,” said World Bank Senior Economist Rong Qian. “As government ramps up spending to implement its inclusive growth agenda, it would need complementary reforms to increase revenue and ensure that the country’s finances are sound and sustainable.”