The Philippine economy is poised to grow at a much slower pace than government’s target this year due to intensifying global uncertainties, the World Bank said on Wednesday, June 8.
Based on World Bank’s Philippine Economic Update June 2022 edition, the Washington-based lender projected that the country’s economy, as measured by the gross domestic product (GDP), would grow 5.7 percent this year.
World Bank’s forecast is slower than President Duterte’s newly revised goal of seven percent to eight percent for 2022. It is, however, unchanged from the lender’s projection released last April.
World Bank said that rising inflation, the Ukraine-Russian conflict, tightening global financing conditions and weaker growth of trading partners like the United States and China were risks to the country’s growth.
In addition, the threat of a new variant-driven surge also hangs over the growth outlook, World Bank said.
“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,” the report stated.
In the first three-months of the year, the country grew 8.3 percent, 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,” World Bank said.
The reopening is shoring up services, especially transportation, restaurant and food services, and wholesale and retail trade, the bank noted.
“Prospects have improved for tourism following the opening of border to vaccinated individuals, reopening of tourist attractions, and relaxed travel requirements for traveler,” World Bank said. “Sustained public investments, along with recovering business activities, will boost construction and industry sectors,” it added.
Meanwhile, Kevin Chua, World Bank senior economist, said taming inflation is a pressing concern as it can 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 is expected to raise the poverty headcount by one percentage point, pushing an additional 1.1 million Filipinos into poverty.
An increase of 10 percent in energy prices, on the other hand, 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,” Chua said.
They include 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.
According to Chua, these interventions will help augment domestic supplies as needed, and greater support to agriculture production through extension services, seeds, and fertilizer.
Social assistance will continue to play an important role in protecting poor and vulnerable households from high inflation and global uncertainties, he added.
“However, given the tight budget situation affecting the government, social assistance needs to be timely and targeted. Improving delivery of social assistance using digital technologies can ensure that assistance will reach those most in need,” the report said.