PH must send the right signal to investors – WB

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The Duterte administration must ensure a smooth economic transition and provide investors with the right signals, the Washington-based multilateral lender World Bank said in a report on Monday.

Policymakers will also need to pursue its 10-point socioeconomic agenda to for the country to sustain high growth rates, it said.

At its Philippine Economic Update report, the World Bank said the Philippines’ short-term growth prospects remain positive despite a number of medium-term risks and policy challenges.

It maintained its 6.4 percent growth outlook for the Philippine gross domestic product (GDP) this year, higher than the 5.9 percent growth in 2015 and within the 6 percent to 7 percent growth target of the government.


As details of the government’s 10-point socioeconomic policies and implementation strategies are still under discussion, the World Bank said businesses are likely to stay cautious in terms of investment and expansion.

“Meanwhile, lingering uncertainty regarding the new administration’s reform agenda will lead to caution among investors and consumers,” it said.

Major structural reform initiatives are proposed in the areas of tax policy and administration, expenditure tracking, land-tenure security and constitutional restrictions on foreign asset ownership.

“If the authorities are able to foster a climate of strong policy credibility over the next six to 12 months, the country’s economic prospects could further improve. This represents an important upside risk to the growth forecast,” it said.

Capacity limitations
The multilateral lender expects Philippine economic growth to ease down to 6.2 percent in 2017 and 2018.
The report said the current forecast assumes capacity limitations may slow the implementation of large-scale public infrastructure projects, and that it could take longer to overcome these obstacles.

The World Bank said while infrastructure spending is expected to accelerate in the next two years, it is challenging to reach the P860.7 billion allocated in the 2017 budget—which would represent a 13.8 percent increase over 2016—unless the government is able to rapidly expand its implementation capacity.

Over the medium-term, the report noted the government’s ability to accelerate infrastructure investment will have a major impact on the economy’s growth trajectory.

While consumption is likely to remain a pillar of future growth, a sustained increase in capital formation driven by public infrastructure investment would accelerate growth on the supply side, it noted.

The World Bank highlighted that in 2017, 40 percent of the planned infrastructure budget will be allocated to road networks, railways, seaports and airports.

“While not all of these infrastructure investments are likely to be executed in the proposed timeframe, rising public investment levels could have both a direct impact on growth and important multiplier effects on the productivity of key sectors, including industry, real estate and construction, and tourism,” it said.

Gross capital formation is expected to be the single largest contributor to growth in 2016 to 2018, it said.
“However, if the government is able to fully implement all planned infrastructure projects, rates of gross capital formation could be even higher than anticipated, boosting overall growth in 2017 and 2018,” it said.

Poverty reduction
The report said economy-wide growth, combined with the government’s avowed commitment to an inclusive development agenda, is expected to generate further gains in poverty reduction in the near-term.

Lowering the poverty rate could be accelerated through greater investment in human capital formation, with an emphasis on health, education and social protection services targeting the poor and vulnerable.

“Poor households are highly concentrated in the agricultural sector, where productivity increases could boost incomes and make growth more inclusive. Accomplishing this would require a comprehensive rural development strategy, and formulating such a strategy is among the new administration’s top policy priorities,” it said.

The creation of more high-productivity jobs in other sectors would expand the distribution of returns from growth, it added.

“These challenges notwithstanding, the Philippine economy continues to benefit from strong macroeconomic fundamentals and is projected to remain among East Asia’s top growth performers over the short- to medium-term,” it said.

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1 Comment

  1. This is a ggod news – a 6.2% growth forecast for 2017, once again given a slightly negative spin by the biased anti-Duterte media.