The World Bank predicted on Monday that the Philippine economy would grow 6.2 percent the year, making the Philippines one of the fastest growing economies in East Asia and the Pacific despite the weak global economy.
The Washington-based bank said in its updated report released Monday that the Philippines’ gross domestic product is forecast to grow 6.4 percent this year and 6.2 percent in 2017 and 2018.
“The Philippine economy may surpass the forecasts if authorities can further ramp up spending on public infrastructure as planned,” says the report titled Outperforming the Region and Managing the Transition.
In 2017, the report says that 40 percent of the planned government spending on infrastructure will be roads, railways, seaports and airports.
“This can boost a large segment of the economy including industrial activities, real estate, construction, and tourism,” according to the report.
Birgit Hansi, World Bank lead economist, said the domestic consumption will also continue to prop up the economy, driven by three factors — rising purchases from an expanding middle-class, remittances from overseas Filipino workers, and the expansion of jobs as a result of the growing economy.
Upon assuming office, Hansi said the new government (of President Rodrigo Duterte) reassured investors and the private sector with continuity of existing macroeconomic policies including fiscal, monetary and trade policies that would support continued economic expansion and poverty reduction.
“Many reforms are being unveiled, specifically on tax policy and administration, the tracking of government spacing, security of land tenure, ease of doing business, and restrictions on foreign participation,” Hansi said.
“But as policy details are still being discussed, some businesses might remain cautious. The completion of the new Philippine Development Plan this year will provide more clarity on the government’s development priorities and further improve the country’s growth prospects,” Hansi added however.
World Bank Country Director Mara Warwick, for her part, said that the country’s macroeconomic stability puts the Philippines in a good position to accelerate inclusive growth that benefits all Filipinos.
“Poverty will decline faster if the returns from economic expansion are invested in building human capital by strengthening health, education, and social protection,” Warwick said.
“Currently, the poor are concentrated in the agriculture sector, where increases in productivity would generate higher incomes for rural dwellers. Achieving this will require a comprehensive rural development strategy, which is among the priorities of the current administration,” Warwick said.
Moreover, the report notes that as economic growth is sustained, and as spending on health, education, and social protection expands, extreme poverty is projected to decline from 10.6 percent in 2012 to 7.8 percent in 2016, 7.2 percent in 2017, and 6.7 percent in 2018.
The report says that the services sector, which include the country’s business process outsourcing industry, will remain a key growth driver, projected to grow at 7.0 percent in 2016, and 6.8 percent in 2017-2018.
With plants and factories operating at almost full capacity of 83-84 percent, the report says expansion in the manufacturing sector would require fresh investments in new equipment, machinery and factories.
In the agriculture sector, the reports says “increasing farm productivity would be important for improving its growth prospects that would lead to more inclusive growth.”