By Chino S. Leyco
The World Bank expects the Philippine economy to grow within the Duterte administration’s target this year but at slightly slower pace despite lingering global and local uncertainties.
Based on the Washington-based lender’s Philippines Economic Update released yesterday, the country’s economy, as measured by its Gross Domestic Product (GDP), is poised to grow at 6.4 percent this year, slightly lower than its earlier forecast of 6.5 percent due to the delay in the enactment of 2018 budget and the prevailing dry spell caused by the El Nino phenomenon.
For 2019, the Duterte administration expects the local economy to expand by 6.0 percent to 7.0 percent.
“The country’s growth outlook remains positive,” Mara K. Warwick, World Bank country director said. “Higher private consumption due to lower inflation, steady growth of remittances, and election spending will fuel growth this year.”
However, she said “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.”
For next year and 2021, the country’s GDP is seen to grow 6.5 percent.
According to the bank, the slightly lower GDP forecast is 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.
Growth of the Philippine economy has historically been driven by consumption, with households contributing more than two-thirds of aggregate expenditures.
Annual private consumption growth declined from 5.9 percent in 2017 to 5.6 percent in 2018 due to high inflation.
However, it is expected to rebound to 5.9 percent in 2019 and 6.0 percent in 2020 due to declining inflation and the continued job generation in the economy.
Remittances are expected to remain steady as new employment opportunities for Filipinos become available in countries like Japan, Germany, and Poland, further fueling consumption.
The World Bank, however, flags several risks that can affect the Philippines’ overall growth prospects, among them the delay in the approval of the 2019 budget and a looming drought.
Under a reenacted budget, the World Bank said, the government cannot implement new programs and projects, thus affecting public investment.
The El Niño phenomenon that is expected to cause several months of dry spell might reduce farm output and raise food prices, it added.
The lender also highlighted the risks posed by external factors, including the potential escalation of trade tensions between the US and China and weak demand for the country’s exports.
It also mentioned potential challenges stemming from a strengthening US dollar, and hikes in US interest rates that could raise borrowing costs for the country’s infrastructure projects.