WB keeps PH growth forecast steady at 6.7% for 2018, 2019

The World Bank (WB) is keeping its 6.7 percent growth forecast for the Philippines for this year and in 2019, but has a lower projection of 6.6 percent in 2020 based on its flagship report, Global Economic Prospects (June 2018).

The report cited a generally modest slowdown in regional growth overall for the countries in developing East Asia and Pacific which it expects to grow by 6.3 percent this year and 6.1 percent in 2019. Still, growth in the region is expected to remain positive for this year, sustaining 2017’s solid exports and domestic demand.

The Philippines at 6.7 percent GDP growth estimate is the third highest in terms of economic performance this year, below Cambodia and Vietnam. China has a growth forecast of 6.5 percent and lower in 2019 of 6.3 percent, while Indonesia is expected to show some growth but not Malaysia and Thailand.

The World Bank noted that for this year, regional financial markets maintained some “buoyant” activity despite the volatility in early to mid-year. “With the exception of China, where investment continues its policy-guided deceleration, investment spending in the region has remained strong. Inflation is generally in line with targets.”

It added that “growth in the Philippines and Vietnam remains robust, but capacity constraints (high capacity utilization rates) limit further acceleration, especially in the Philippines.”

The World Bank said the region “benefits from solid fundamentals, including moderate domestic and external imbalances and significant policy buffers.”

However, some countries in the region continue to face financial sector vulnerabilities. It noted countries with elevated levels of debt such as China, Lao PDR, Malaysia, Mongolia, Papua New Guinea, Thailand. Other concerns, it said are ‘’(the) still-fast credit growth (China, the Philippines, Vietnam), high foreign participation in local-currency sovereign bond markets (Indonesia, Malaysia), and sizable fiscal deficits (Cambodia, Lao PDR, Mongolia, Vietnam).”

The World Bank said the modest slowdown in regional growth is mostly because of the gradual structural slowdown in China. Excluding China, it said the activity in the region is expected to moderate from 5.4 percent in 2018 to 5.3 percent in 2019. The outlook is predicated on moderately higher commodity prices, strong but gradually moderating global demand, and incremental tightening of global financing conditions, it added.

The report emphasized that so far this year, economic conditions in East Asia and Pacific are favorable, including robust global trade, mostly contained borrowing costs, and sustained capital inflows. “Growth across the region remains solid and exports have surged in both volume and value terms. Private consumption has been supported by strong consumer confidence and rising household wealth in an environment of moderate inflation. Investment spending in the region has also been strong,” it said.