The Philippine economy is expected to grow by 6.6 percent this year and by 6.9 percent in 2015 as it recovers from the destruction and damage caused by Typhoon Yolanda [Haiyan], the World Bank said Monday.
The World Bank said the adverse impact from ‘Yolanda’ will be mitigated by the government’s reconstruction efforts as well as job generation.
In its Philippine Economic Update released on Monday, WB Country Director Motoo Konishi said the government’s $8-billion reconstruction program under the Reconstruction Assistance on Yolanda (RAY) plan would ease the economic losses from the super typhoon that lashed the country in November.
Prior to ‘Yolanda,’ the World Bank’s growth projections for the Philippines had been 6.7 percent for 2014 and 6.8 percent for 2015
Konishi also said the $8-billion RAY plan would help the country “build back better homes, schools, health facilities, utilities, infrastructure, and livelihoods” that could lift the country’s gross domestic product above 6 percent.
“Over the coming years, a comprehensive agenda to support the revival of agriculture and manufacturing will further strengthen the country’s resilience to calamities. Reforms to secure property rights, enhance competition, simplify regulations, and increase investments in health, education, and infrastructure will make this happen,” Konishi said.
“If people, particularly the poor, have good jobs, they are able to raise incomes, save more, and invest for the rainy days,” he added.
The WB said that while destruction from ‘Yolanda’ caused it to lower its growth forecast for this year, growth would inch up depending on the “speed and scope of reconstruction programs.”
It said the challenge would be developing and enforcing standards on building back better infrastructure, and having an action-oriented program on employment generation.
Other than local factors, the WB economic report noted that Philippine growth could be affected by a slower global recovery—particularly a slower Chinese economy and demand that would slightly decrease Philippine exports and weaker supply chain linkages for electronic parts—as well as the US Federal Reserve’s quantitative easing (QE).
Karl Kendrick Chua, WB senior economist, sees mixed results if the QE is scaled back. He said scaling it back could result in higher borrowing costs and lower capital inflows, but it may also pave the way for a flexible exchange rate system and sustainable deficits and debt levels.
“The country continues to benefit from strong macroeconomic fundamentals, characterized by low and stable inflation, healthy external balances, and improving government finances. These strong fundamentals will continue to shield the economy from the impact of the global economic slowdown and financial market volatilities,” Chua said.
For his part, WB lead economist Rogier van den Brink said that the Philippines is currently enjoying windows of opportunities “for an action-oriented and coalition-supported program on job creation.”
“The country is benefiting from a pro-poor government. Second, the country stands to benefit from the strong growth prospects of a dynamic East Asia region. Third, past the half way mark, the reform momentum of the Aquino Government is accelerating. And finally, there is a growing consensus among a broad spectrum of stakeholders that the current opportunity to enact reforms marks a critical juncture in the country’s history,” van den Brink said.
“By undertaking structural reforms now, the economy can move towards a more inclusive growth path and create more and better jobs for the majority of the population,” he added.
Various financial institutions such as HSBC and BPI also projected GDP growth forecasts of below 7 percent for 2014. The government, however, is optimistic that the economy would grow by anywhere from 6.5 percent to 7.5 percent in 2014.
According to the Philippine Statistics Authority, the Philippine economy grew 7.2 percent in 2013 and has been growing by an average of 7 percent over the past two years.