WB LIFTS PH ECONOMIC GROWTH PROJECTION TO 6%

Strong domestic demand this year is underpinned by consumer spending, drawing strength from the continuing jobs recovery, and the steady flow of remittances

MANILA – The World Bank on Wednesday revised upward its Philippine economic growth projection to 6 percent this year from 5.6 percent as strong domestic demand is expected to drive growth.

“Despite weak global conditions, we expect strong domestic demand to grow to 6 percent in 2023 and move to its growth potential over the medium term,” World Bank senior economist Ralph Van Doorn said in a briefing for the Philippines Economic Update (PEU) report.

The World Bank’s latest forecast falls within the government’s 6 to 7 percent economic growth target for the year.

For 2024 and 2025, World Bank expects the Philippine economy to grow by 5.9 percent.

The report said the strong domestic demand this year is underpinned by consumer spending, drawing strength from the continuing jobs recovery and the steady flow of remittances.

Other drivers of growth include fixed capital investment as a result of upbeat domestic activity and improved business confidence.

The services sector is also expected to support growth while the recovery of international tourism will boost the expansion of transportation services, accommodation, and food services.

Aside from these, the amendments to the Public Service Act, Foreign Investment Act, and Retail Trade Liberalization law are expected to encourage private investment and strengthen growth in the country over the medium term.

However, World Bank country director for Brunei, Malaysia, Philippines, and Thailand Ndiame Diop pointed out that persistent global and domestic risks could hinder recovery and poverty reduction.

“It is essential to sustain improvements in social protection to help families, especially the poor and vulnerable, cope with economic difficulties as the country navigates the global slowdown, budget constraints, high prices of basic commodities, and climate-related risks,” he said.

Diop said ensuring efficient delivery of social protection programs will require speeding up current government reforms, including the adoption of the national identification (ID) system for social protection delivery, updating the targeting system for identifying poor and vulnerable families, innovations in digital payment systems and strengthening financing mechanisms and readiness for disaster response.

Global risks to the country’s economic outlook, meanwhile, include the possibility of rising global inflation, higher global interest rates, and an escalation of geopolitical tensions brought about by Russia’s invasion of Ukraine which could further cause a sharper-than-expected global slowdown that could hamper Philippine exports.

On the domestic front, World Bank said high inflation remains a risk to the economic outlook due to several factors including natural disasters affecting food supply, the threat of El Niño that could further constrain food production, logistics and supply chain challenges, and pressure from domestic demand. /