World Bank keeps PH growth forecast

Despite worrisome global uncertainty, the World Bank has maintained its growth forecast for the Philippines on the back of strong public investments and the expected increase in consumer demand ahead of the elections next year.

WB said the country’s economy, as measured by its Gross Domestic Product (GDP), may expand by 6.7 percent this year and in 2019 amid uncertain global conditions.

However, the Washington-based multilateral banking institution stressed that to sustain a mediumterm growth of seven percent average, the Philippines has to maintain a high-spending investment program amid capacity constraints, according to the World Bank.

“The government’s ability to carry out its investment spending agenda will determine if the Philippines can achieve its growth target of 6.5-7.5 percent over the medium term,” said World Bank lead economist for the Philippines, Birgit Hansl.

Hansl said keeping up high private investment levels and state spending is critical to ensure growth momentum even as “capacity constraints become more binding.”

In 2017, the government increased its spending by more than 10 percent and officials expect to sustain doubledigit growth in the next years following the launch last year of its "Build, Build, Build" infrastructure agenda which will require up to $170 billion of investments.

This becomes more crucial as the export-driven economy will have to face a more challenging time with global growth projected to moderate and decelerate in the future, said Hansl.

Based on the World Bank’s June 2018 Global Economic Prospects, it expects global growth to gradually slowdown in the next two years due to higher commodity prices which so far is viewed as moderate, and because of the “strong but gradually moderating global demand.”

It also cited the “incremental tightening of global financing conditions” which would impact the global economy. “Uncertainty around global growth conditions has risen, with the possibility of trade and other policy shocks emerging from major economies,” said the World Bank.

The government consumption growth was also revised upwards while private consumption growth is expected to expand at 5.9 percent in 2018 and 6.2 percent in 2019. “Investment growth was slightly upgraded due to higher public capital outlays, including increased infrastructure spending. Overall, it is anticipated that real GDP growth will increase towards the end of 2018 and into the first half of 2019 with higher election-related public spending,” it said.

The June 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.

Last year, the Philippine GDP grew by 6.7 percent, it was one of the fastest-growing countries in Asia. The World Bank estimates for 2018 and 2019 are below the government’s seven percent to eight percent growth estimates.

In the meantime, the World Bank has a global growth forecast of 3.1 percent in 2018 despite a “softening” economic growth. It expects global growth to slow down further in the next two years as “advanced-economy growth decelerates and the recovery in major commodity-exporting emerging market and developing economies levels off.”