THE World Bank has upgraded its economic outlook for the Philippines for this year and the next two years, citing high confidence among investors and consumers and the government’s commitment to increase public infrastructure spending in the coming years.
In a statement on Thursday, the Washington-based lender said it now projects the Philippine economy to grow by 6.8 percent in 2016 compared to the earlier forecast of 6.4 percent announced in October.
It noted that the growth in the third quarter of 2016 was higher than expected, driven by accelerating investment and private consumption growth.
The Philippines’ gross domestic product (GDP) grew at a faster-than-expected pace of 7.1 percent in July to September, compared to a revised 6.2 percent growth in the same period a year earlier. The government has set a GDP growth goal of 6 percent to 7 percent for 2016, from the actual 5.8 percent recorded in 2015.
The World Bank said the government’s pre-election stimulus fueled continued strong growth performance in the first half of 2016.
“Recent economic trends illustrate the high confidence among investors and consumers, and provide the foundation for a more optimistic outlook for the remainder of 2016 and for 2017,” said Birgit Hansl, World Bank lead economist for the Philippines.
“The economy’s strong performance in October and November, and continued policy commitment to an increase in public infrastructure spending, are expected to carry the economy’s growth momentum over to 2017-2018,” she added.
The multilateral lender also raised its growth projections for the Philippine economy for 2017 to 6.9 percent from its previous forecast of 6.2 percent, and set its growth projection for 2018 at 7 percent.
The government has set a growth target of 6.5 percent to 7.5 percent for 2017, and 7 percent to 8 percent for 2018 and beyond.
The World Bank expects growing capital investment as the Philippine economy’s primary growth engine. Despite an expected increase in interest rates in 2017, monetary policy is expected to remain supportive of growth, resulting in continued expansion in credit.
It added that the implementation of large infrastructure investments is projected to lead to significant spillover effects into consumption growth next year. Accompanied by robust credit growth to households and healthy remittances, this is expected to fuel consumption.
It also said Philippine exports are expected to grow at a similar rate as in 2015-2016 as the global economy slowly adjusts, with the growth momentum shifting away from advanced economies back toward emerging markets and developing economies.
NEDA sees Q4 growth of close to 7%
Meanwhile, the National Economic and Development Authority (NEDA) said fourth-quarter GDP growth likely settled closer to 7 percent.
“Drivers are public spending, exports are picking up, consumption is still strong especially [because of]the coming holidays,” Socioeconomic Planning Secretary Ernesto Pernia told reporters during NEDA’s year-end press briefing also held on Thursday.
On the supply side, agriculture is expected to improve because of the onset of the rainy season while manufacturing is also picking up, he added.
“All things considered, our economy’s continuing strong growth, decreasing poverty, lower unemployment rates, and new foreign investments this year are all good signs of things to come,” Pernia said.
Together with a low inflation environment, sustained strong growth will pave the way for continued and faster poverty reduction, he added.
“We see this momentum continuing next year and hopefully in the years to come,” he said.
Pernia, however, said this will have to be supported by sustained and deepened reforms such as the comprehensive tax reform program, sustained investments in infrastructure, easing of restrictions on foreign investments, reduction of the cost of doing business, strengthening agro-industrial linkages, and the full implementation of the Responsible Parenthood and Reproductive Health (RPRH) Law.
“Moreover, high economic growth will mean nothing if the welfare of the poor and marginalized is not improved.
Thus, along with increased investments in human capital to improve access to economic opportunities, we will continue to prioritize agricultural development within the broader framework of rural and regional development,” he said.
According to NEDA, most of the risks to the growth outlook come from the external environment, such as the slow revival of the European and Japan economies, China’s growth slowing, Brexit, and the election in Italy.
On the domestic side, the agency said risks to growth were weather disturbances, a possible failure in the government’s peace talks with rebels groups, possible oil price hikes, the non-passage of the proposed tax policy reform program, and the non-implementation of the RPRH Law.
“That, hopefully, can be surmounted with the strong hand of the President and his popularity,” Pernia said.