But only if Budget, Yolanda plan implemented
THE World Bank still sees the Philippine economy expanding by 6.5 percent this year but only if the government fully executes its budget for the year and implements the Typhoon Yolanda (Haiyan) master plan.
In its East Asia and Pacific Update, the Washington-based lender said Philippine economic growth can rebound to 6.5 percent in 2015 from the actual expansion of 6.1 percent last year.
In January, the World Bank cut its 2015 growth forecast for the Philippines to 6.5 percent from its earlier estimate of 6.7 percent in October last year.
The latest WB projection, however, falls below the 7 percent to 8 percent target of the government for the year, but is somewhat within range of the 6.7 percent growth projection of the International Monetary Fund (IMF) and 6.4 percent estimate of the Asian Development Bank (ADB).
The IMF has said growth this year will come from lower commodity prices, strong private construction and export growth, but it also urged the government to improve spending, particularly on infrastructure and human capital.
Manila-based ADB said buoyant private consumption, a solid outlook for investment and exports, and a recovery in government expenditure will boost economic expansion in 2015.
Forecasts from global investment banks Barclays of the UK, DBS of Singapore and Standard Chartered Bank agree that lower oil prices, infrastructure development, government spending, and increased manufacturing output will drive growth past the 6 percent level in 2015.
“For 2015, 6.5 percent growth is not out of reach if the government fully executes the 2015 budget and the recently approved Typhoon Yolanda master plan,” the World Bank said.
The lender was referring to the P2.606 trillion national budget for 2015 and the P167.9 billion rehabilitation program for Yolanda-affected communities.
“Moreover, strong remittances, falling oil prices, and upbeat consumer and business sentiments indicate stronger growth in 2015,” it added.
The World Bank also forecasts economic growth staying at 6.5 percent next year supported by election-related spending.
“Historically, first-half domestic demand growth is around 2.4 percentage points higher in an election year compared to a non-election year,” it explained.
The lender said economic growth has become more inclusive in recent years as it is translating into stronger job creation and likely faster poverty reduction.
“Efforts at reconciling different household surveys suggest that poverty likely decreased strongly between 2012 and 2013, after a decrease of only 0.8 percentage points between 2009 and 2012 to 15.4 percent,” it said.
Poverty to decline
The World Bank pointed out that the 2013 Annual Poverty Indicators Survey of the government suggests that the real income of the bottom 20 percent grew much faster than the rest of the population, through substantial growth of domestic cash transfers to this quintile—confirming that the government’s conditional cash transfer (CCT) program is well targeted and reaching the poor.
The lender said poverty in the country is projected to decrease from 15.4 in 2012 to 10.9 percent in 2017 if the government maintains job creation, economic growth, and its current poverty alleviation efforts.
It also noted that lower food inflation will also help in pulling down poverty levels.
“The Philippines needs to accelerate reforms that can translate higher growth into even more inclusive growth—the type that creates more and better jobs—and improve the impact of social sector spending,” it said.
In this regard, the World Bank said eradicating poverty and boosting shared prosperity will require implementing an already well-known policy agenda of structural reforms.
These key reform areas include increasing investments in infrastructure, health, and education; enhancing competition to level the playing field; simplifying regulations to promote job creation, especially by micro and small enterprises; and protecting property rights to encourage more investments.
“In the near-term, attention is needed in raising revenues equitably and efficiently to finance the much needed investment in physical and human capital,” it said.
The lender also pointed out the importance of expanding the scope and ensuring the impact of the universal health coverage and conditional cash transfer programs.
Over the medium to long-term, higher investments in infrastructure, health, and education are key to achieving inclusive growth, it said.