The World Bank has slightly revised downward its growth forecast for the Philippines for 2024 due to the economic slowdown recorded in the third quarter of this year.
According to the World Bank’s Philippine Economic Update report released yesterday, the Washington-based agency sees growth to hit 5.9 percent from the previous outlook of six percent in its report released last October.
The latest report said the downward adjustment for 2024 reflects the impact of climate events that led to softer than expected growth in domestic activity, particularly in the third quarter of the year.
In particular, the country was subject to several typhoons that resulted in significant damage to personal property, public and private infrastructure and agriculture production.
“While these effects of El Niño, La Niña, and recent typhoons were disruptive in the short-term, they are unlikely to dampen the medium-term growth prospects due to improving conditions that will support domestic demand and improve the country’s resilience,” the World Bank said.
The World Bank’s outlook falls below the Philippine government’s own growth assumption of six to 6.5 percent for 2024.
The multilateral agency, however, kept its projection of 6.1 percent for the country’s economic growth in 2025, while the outlook for 2026 is six percent.
These figures are at the lower end of the government’s projected band of six to eight percent over the medium-term.
Firmer footing
“Strong growth puts the country on a firmer footing to maintain gains in poverty reduction,” Zafer Mustafaoğlu, World Bank country director for the Philippines, Malaysia and Brunei Darussalam,” said in a statement.
“The country remains vulnerable to extreme weather events such as typhoons and heavy monsoon rains. Therefore, it is important to sustain proactive measures to protect poor and vulnerable households,” Mustafaoğlu added.
The report said private consumption is expected to remain the main engine of growth over the medium term, fueled by low and stable inflation, steady inflows of remittances from overseas workers and higher employment rates that boost incomes.
The government is also well positioned to attract higher investments from the private sector, both foreign and local, after recently liberalizing investment rules and lowering interest rates, the World Bank said.
The World Bank sees inflation easing over the medium-term, to 3.2 percent this year from six percent last year, down to 3.1 percent and three percent in 2025 and 2026, respectively.
Local, global risks
However, the multilateral agency flags local and global risks that could hamper growth in the near term.
“Internationally, we can mention three: geopolitical tensions, global economy and policy uncertainty. There is a risk of intensification of conflict and geopolitical tension. That will have an impact on a number of costs for firms. I will create uncertainty if it materializes,” Gonzalo Varela, World Bank lead economist, said during a press conference in Taguig yesterday.
“Weaker than expected growth in the US and China is another risk that may undermine global trade, manufacturing and tourism activities. But there is also substantial uncertainty with respect to trade measures introduced by large economies that may impact global trade,” he added.
Locally, Varela said risks mostly relate to weather events.
“It’s important then to sustain proactive measures to protect the poor and vulnerable households in this context to sustain this inclusive growth momentum that the economy is facing,” he added.
Meanwhile, Jaffar Al-Rikabi, World Bank Senior Economist, was asked during the briefing when the bank expects the Philippines to transition to upper middle income country status, to which he responded that it is less important to know exactly when, as it is much more important that it actually maintains that development in growth.
“Because famously, if you look all over the world, a big issue is the middle income trap, right? Many countries end up stalling their catch-up, I would say, to advanced economies,” Al-Rikabi said.
“The emphasis has to be not only on reaching the upper middle income threshold but keep on growing by keep on being competitive investing in your people, investing in your economy, that has to be the focus so that hopefully the country becomes richer and richer before it becomes aged as a population,” he added.
