The World Bank expects the Philippine economy to grow by an average of six percent in the next three years — one of the fastest rates in the region, despite challenges to jobs arising from new technologies like robots and artificial intelligence (AI).
In its East Asia and the Pacific Economic Update report for October 2024, the Washington-based multilateral lender jacked up its 2024 gross domestic product (GDP) growth forecast for the Philippines to six percent from 5.8 percent in its April report.
For 2025, its Philippine growth projection was also hiked to 6.1 percent from 5.9 percent previously.
Its upgraded forecast for this year is now within the government's six- to seven-percent target range, which Budget Secretary and Development Budget Coordination Committee (DBCC) Chair Amenah F. Pangandaman had said may also be for upward revision following a drop in inflation these past months.
The World Bank's growth projection for next year nonetheless remained below the economic team's higher 6.5- to 7.5-percent goal.
Still, the outlook for the Philippines is among the rosiest in Southeast Asia, next only to Vietnam's forecasted GDP growth rates of 6.1 percent for 2024 and 6.5 percent for 2025.
"The medium-term outlook remains favorable, averaging six percent in 2024 to 2026. Strong growth will be driven by robust domestic demand, benefitting from more accommodative monetary policy, and sustained public investment," the World Bank said separately in its latest Macro Poverty Outlook report for the Philippines.
"Private consumption will remain as the main growth engine, supported by steady remittance inflows, a healthy labor market, and lower inflation," the World Bank added. September headline inflation fell to a four-year low of 1.9 percent, while the jobless rate eased to four percent in August from July's 4.7 percent.
"The continuous improvement in the labor market and the easing of inflation will likely boost growth in household incomes," the World Bank said.
"Improving investment activity will also support growth, as public investment will remain above five percent of GDP despite fiscal consolidation," the lender said, referring to the government's plan to narrow the yawning budget deficit back to pre-pandemic levels.
As the Bangko Sentral ng Pilipinas (BSP) and other central banks around the world ease monetary policy, "declining real interest rates will benefit both private investment and household consumption" locally, the World Bank added.
It would help that global economic growth is expected to "gradually improve" in the near term, benefitting demand for Philippine-made goods as well as services served here, according to the World Bank.
While extreme climate events still pose risks to the Philippines — one of the countries most exposed to natural disasters, the World believes the poverty rate would "continue to decline."
"Poverty incidence is projected to decrease from 17.8 percent in 2021 to 13.6 percent in 2024 and further decrease to 11.3 percent in 2026, using the World Bank's poverty line for lower-middle-income countries of $3.65 per day, 2017 purchasing power parity (PPP)," it said.
The World Bank nonetheless cautioned the Philippines to brace for foreseen external challenges such as slower Chinese and global economies as well as geopolitical tensions that may cause commodity price shocks.
"On the domestic front, food security may be challenged given persistent weakness in agriculture output, especially in the presence of a stronger-than-expected episode of La Niña," the World Bank warned.
Also, the advent of AI may both be good and bad for the Philippine economy which heavily relies on jobs and dollar earnings from the booming business process outsourcing (BPO) industry.
In a press briefing on Tuesday, Oct. 8, World Bank East Asia and Pacific chief economist Aaditya Mattoo noted that the local BPO has made strides as it started with simple call center services and then matured to more sophisticated professional offerings like accounting, architecture, design, engineering, legal and tax services.
With even higher-level technologies like new algorithms and software development, basic and routine jobs and tasks are "there's no question -- that more and more, they're going to AI," Mattoo said.
"But many of those intermediate professions will get empowered by AI -- they'll become more productive. And since their wages are still so much lower than the wages of anybody in [developed countries like] the United States, their comparative and absolute advantage would grow," he said.
Mattoo added that people working with these new technologies would "reap huge benefits."
However, women workers in the Philippines are more exposed to AI's displacement effect than men, especially those with higher educational attainment and employed in non-agricultural industries like commerce, the World Bank noted in its latest East Asia and the Pacific Economic Update report.
The World Bank also noted that "the productivity gains from automation and the resulting higher scale of production helped create an estimated two million jobs (4.3 percent of formal skilled employment) for skilled workers engaged in non-routine manual and cognitive tasks" in Indonesia, Malaysia, the Philippines, Thailand and Vietnam between 2018 and 2022.
On the other hand, "robots displaced an estimated 1.4 million or 3.3 percent of low-skilled formal workers who were engaged in routine manual work" in these five countries during the same period, the World Bank said.
While robot adoption levels remain relatively low in the Philippines compared to its neighbors, light manufacturing industries like plastics and rubber are increasingly utilizing this technology in the country, the report noted.