World Bank maintains PH growth at 5.6% for 2023

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The World Bank has kept its growth forecasts for the Philippines for this year and next, with the economy’s expansion to be supported by a healthy labor market and stable remittances growth that continue to fuel robust household consumption.

According to the Philippines Economic Update published yesterday, the Philippine economy is expected to grow by 5.6 percent in 2023 and edge up to 5.8 percent in 2024, both similar to the projections made last October.

The World Bank said the services sector is anticipated to be the main driver of growth, supported by the ongoing recovery of the tourism sector and the consistent performance of the information technology and business process outsourcing industry.

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This activity is likely to stimulate job creation, boost household incomes and benefit consumption and tourism-related industries, the multilateral agency said.

The report, however, said the growth outlook is subject to downside risks, pointing out that the threat of higher-than-expected global inflation, escalating geopolitical tension and tighter global financing conditions could dampen global activity and increase risks of financial stress.

“Persistently high inflation amid volatility in global commodity prices, the high cost of borrowing for businesses and households and geopolitical uncertainty have affected private investments,” Ndiamé Diop, World Bank country director for Brunei, Malaysia, the Philippines and Thailand, said.

“Full implementation of key recent reforms is important to mitigate these challenges, stimulate private investment and promote job creation and poverty reduction,” he added.

Inflation is likely to ease, but there are risks that could cause it to rekindle, including volatility in global commodity prices amid escalating global geopolitical tensions and increasing trade restrictions; the persistent threat of climate shocks, including the current episode of El Niño, to the domestic food supply; and currency depreciation, the report said.

Specifically, headline inflation is expected to increase slightly from 5.8 percent in 2022 to 5.9 percent in 2023, and is projected to fall to 3.6 percent in 2024.

According to Ralph Van Doorn, World Bank senior economist, the government’s strategy of using both monetary and non-monetary policy measures will help contain inflationary pressures, while continuing the use of targeted social protection and transfer programs will mitigate the impact of high inflation on poor and vulnerable Filipinos.

He added that enhancing forecasting and planning to help stabilize food prices, reduce market volatility and ensure a consistent and reliable food supply remains fundamental to reducing inflation in the short term.

“In the long term, more effective public spending in agriculture could boost productivity and improve local food supply, thereby reducing the impact of food price shocks that disproportionately affect the poor,” said Van Doorn.

“The flagship 4Ps cash transfer program, the digital food stamp program to ‘food poor’ families, cash subsidies to farmers and fuel subsidies to public utility vehicle operators remain important tools to protect the incomes of poor and vulnerable Filipinos,” he added.

To enhance long-term growth potential, addressing structural challenges to growth in key sectors will be key, the report said.

Effective implementation of pro-investment reforms in renewable energy and sectors like trade, transport and telecommunications would generate economy-wide productivity gains.

Also, undertaking reforms to increase access and enhance the resilience of water supply and sanitation, education and health care systems, can enhance potential growth in the face of climate change impacts, public health crises or natural disasters, the World Bank said.

 

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