Washington-based lender World Bank has forecast a year of disappointing growth for the Philippines in 2014, but banking giant Standard Chartered thinks otherwise as it projected the economy to remain one of the fastest-growing among the world’s emerging economies.
In its latest Global Economic Prospects (GEP) report released on Wednesday, the World Bank said that its outlook for developing countries like the Philippines is for flat growth in 2014.
“Developing country growth is expected to pick up slowly, as tailwinds from stronger high-income growth are countered by capacity constraints and an eventual tightening of financial conditions,” it stated.
The World Bank report said that bad weather in the United States, the crisis in Ukraine, rebalancing in China, political strife in several middle-income economies, slow progress on structural reform, and capacity constraints are all contributing to a third straight year of sub 5 percent growth for the developing countries as a whole.
The report noted that the overall economic activity in developing countries slowed in early 2014 and that much of the aggregate slowdown reflected weakness in China, whose GDP registered only 5.8 percent growth in the first quarter of the year.
The lender said that weakness was also evident elsewhere, including the Philippines where GDP growth slid to 5.7 percent in the first quarter.
Based on this, the lender retained its earlier projection of 6.6 percent growth for the Philippines this year, a little over than the lower end of the government’s 6.5-percent to 7.5 percent full year growth target for 2014.
Contrasting the World Bank’s outlook, however, global bank Standard Chartered Bank is optimistic that Philippine economic growth will be sustained at 7.1 percent in 2014, only slightly lower than the 7.2 percent performance in 2013.
“The Philippines’ recent economic boom has made it one of the world’s fastest-growing emerging economies. We expect sustained and more broad-based growth to help the country achieve middle-income status and structural development (‘the finals’),” the bank said in a report released on Tuesday.
Standard Chartered said that domestic and external sectors such as vehicle sales, infrastructure, ratings upgrade, exports and international reserves are expected to continue to prop up the country’s growth this year.
It said that strong private consumption and investment growth will be supported by robust private and commercial motor vehicle sales.
Public investment growth can be traced back to government infrastructure spending, which grew by nearly 50 percent year-on-year in the first two months of 2014, the lender said.
The bank is also seeing increased investor optimism to be fueled by further upgrades of the Philippines’ sovereign credit rating, following an upgrade to the country’s BBB- to a BBB rating on May 8 by Standard & Poor’s.
Export growth has also remained positive, even as a ban on trucks in Manila during peak hours has lengthened the time it takes to process trade, it added.
In terms of external factors, the bank expects continued positive external balances to support the Philippines’ international reserves.
“A rising services trade surplus and remittance inflows are likely to continue to support the current account surplus, despite the goods trade deficit. In 2013, services exports climbed 6.6 percent, exceeding services import growth of 5 percent,” it said.
Standard Chartered said that secondary income—mostly remittance inflows—rose 9.5 percent in 2013, faster than 5.3 percent in 2012, while financial account outflows are likely to have stabilized since January and remain stable for the rest of the year.