World Bank keeps 6.7% growth forecast for Phl

The World Bank has maintained its growth forecast of 6.7 percent for the Philippines from 2018 throughout 2019, but cautioned the country to be vigilant of the economy’s capacity to service rising demand and stave off inflationary pressures.

In its June 2018 Global Economic Prospects report, the multilateral finance institution said it now sees the Philippine economy growing faster in 2020 to 6.6 percent compared with its January 2018 forecast of 6.5 percent.

“Growth in the Philippines and Vietnam remains robust, but capacity constraints (e.g., high capacity utilization rates) limit further acceleration, especially in the Philippines,” the World Bank said.

With the implementation of the tax reform law that raised the take-home pay of workers, the domestic economy is seeing robust demand that producers are striving to match as seen in high capacity utilization rates. Having a sustained high demand, however, with the producers experiencing capacity constraints— factors that prevent businesses from servicing demand—can stoke inflation, it said.

The World Bank did not specify capacity constraints affecting the local economy, but such constraints can be in the form of infrastructure, manpower and utilities, among others.

The Philippines is expected to remain among the fastestgrowing economies in Asia along with Vietnam which is expected to grow 6.8 percent this year; Myanmar which is seen growing 6.7 percent; Lao PDR, 6.6 percent; China, 6.5 percent and Cambodia, 6.9 percent.

On Tuesday, Budget Secretary Benjamin Diokno said rising inflation —which spiked to 4.6 percent in May — is not expected to dampen economic output in the second quarter of the year.

“I’m very confident that we will hit seven percent in the second quarter because of the impact of TRAIN on personal income tax reduction,” he said.

The domestic economy expanded 6.8 percent in the first quarter of the year, but the National Economic and Development Authority (NEDA) said growth could have been faster had rapid growth in inflation not dampened consumption and productivity in several sectors.

“The impact of the income tax reduction was not yet felt in the first quarter, but it will be more felt in the second quarter,” Diokno said.