The World Bank has revised upwards its growth forecast for the Philippines this year with the expansion seen to be supported by strong domestic demand.
According to the Philippine Economic Update released yesterday, the country is expected to grow by six percent this year.
The latest projection is within the government’s full-year growth assumption of six to seven percent.
The World Bank’s latest outlook for the Philippines is an upgrade from the 5.6 percent projection released in the East Asia and the Pacific Economic Update April 2023 report.
For 2024 and 2025, the economy is seen to grow at a slower pace of 5.9 percent.
The Washington-based agency said strong domestic demand is underpinned by consumer spending drawing strength from the continuing jobs recovery and the steady flow of remittances.
Fixed capital investment will also contribute to growth, anchored on upbeat domestic activity and improved business confidence.
The services sector will continue to support growth, buoyed by spillovers from China’s reopening, it said.
It added that recovery of international tourism will contribute to boost growth of transportation services, accommodation and food services, as well as wholesale and retail trade services.
The country’s information technology-business process outsourcing industries will also continue to bolster the services sector, as foreign companies outsource their business operations to the Philippines to reduce costs, the agency said.
The implementation of recently passed reforms that allow greater foreign participation in the economy will encourage private investment and strengthen growth in the country over the medium term, the World Bank added.
However, Ndiamé Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand, noted persistent global and domestic risks that can 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,” Diop said.
The report said ensuring an efficient delivery of social protection programs would require speeding up current government reforms, including adoption of the national 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 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, thus hampering Philippine exports, the World Bank said.
On the domestic side, the 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.
The multilateral agency forecasts the country’s inflation rate to be 5.7 percent, 3.6 percent and three percent this year, next year and in 2025, respectively.
Ralph Van Doorn, World Bank senior economist, said addressing inflation requires implementing measures such as reducing tariff and non-tariff barriers, enhancing domestic supplies and bolstering agriculture with extension services, seeds and fertilizers.
“In the face of escalating prices, a comprehensive strategy is needed to guarantee sufficient food for everyone. This entails a more productive agriculture and food system that is resilient to climate risks, serves all consumers and competes effectively on both local and global markets,” Van Doorn said.
Over the long-term, the report advocates for a transition towards cleaner energy to further the country’s climate change mitigation efforts.
A shift towards clean energy would not only decrease dependence on imported fossil fuels, but also enhance energy security through increased use of indigenous and renewable energy sources, it said.
