WB forecasts robust GDP growth for PH in 2014, 2015
The Philippine economy is likely to sustain high growth until next year despite the challenging global environment and the impact of the recent super-typhoon “Yolanda,” the World Bank announced yesterday.
But while the Washington D.C.-based bank expects the country’s gross domestic product (GDP) growth to remain strong, the lender has lowered its projection by 0.1 percentage point for this year, but slightly raised the 2015 forecast.
The World Bank is now estimating that Philippine GDP may expand 6.6 percent this year and 6.9 percent in 2015. It earlier projected the country’s annual output to be at 6.7 percent and 6.8 percent, respectively.
In 2016, the World Bank is projecting a 6.5 percent economic expansion for the Philippines.
“The damage brought about by typhoon ‘Yolanda’ is likely to pull down consumption growth, but reconstruction spending can partially offset the decline in GDP growth… These projections crucially depend on the speed and scope of the reconstruction program,” the World Bank said.
The bank’s latest growth forecast for this year is at the low-end of government’s target of 6.5 percent to 7.5 percent, while its 2015 projection is below the 7 percent to 8 percent goal of the Aquino administration.
In the short term, the World Bank suggested that a well-designed as well as rapidly executed recovery and reconstruction program to “build back better” can boost the nation’s economic growth beyond current projections.
“Over the medium term, growth prospects can be enhanced by a sustainable ramping up of infrastructure spending,” the bank said.
But the World Bank also warned about the downside risks to the country’s growth, which include a slower global recovery, financial market volatilities following the tapering of the US stimulus program, potential bubbles in the real estate sector.
The lender also cited that there is a possibility of slower post-typhoon reconstruction, and domestic reform lags.
“As seen in 2013 and despite the Philippines’ strong macroeconomic fundamentals, the country will be affected by regional contagion, given the large share of financial market assets held by foreigners,” the bank said.
“Slower global recovery in high-income countries and financial market volatility could slow growth through weaker external demand, large capital outflows, and higher interest rates,” it added.
World Bank also warned unchecked growth of the real estate sector, including shadow financing for real estate, is a source of risk.
“A slower pace of reconstruction spending could pull down 2014 growth by up to 0.6 percentage points. Finally, domestic reform lags, in particular reforms to raise tax revenues, could undermine a fiscally sustainable acceleration of the ambitious infrastructure spending program,” the bank said.