The World Bank said it has revised its forecast growth for the Philippine economy for 2017 down to 6.8 percent from 6.9 percent on account of the slowdown recorded in the first quarter.
“The World Bank projects continued robust growth for the Philippines and expects the country’s economy to expand at 6.8 percent in 2017,” it said in a statement released over the weekend.
“The new and slightly revised 2017 projection considers recent economic trends and compares with the 6.9 percent forecast released in the April edition of the World Bank Philippine Economic Update,” the Washington-based multilateral lender explained.
The revised forecast for the whole year is lower than the rate of growth in 2016, which stood at 6.9 percent. The government has set a growth target of between 6.5 percent and 7.5 percent for 2017.
The World Bank said its updated economic outlook for the Philippines for 2017-2018 is part of its quarterly forecast exercise. The forecast for 2018 remains unchanged at 6.9 percent.
Slower public spending
Reflecting slower public spending in the first quarter, government consumption and investment growth somewhat weakened on an annual basis, the multilateral bank said. However, exports and private consumption remained strong.
“Growth in the first quarter of 2017 was in line with the World Bank’s growth projection, given the high base in quarter one of 2016, when large election-related spending boosted growth,” it said, referring to 6.4 percent growth in the first quarter of the year, which stood lower than 6.9 percent a year earlier and 6.6 percent in the final quarter of 2016.
Birgit Hansl, World Bank lead economist for the Philippines, said that in the medium term, supporting higher investment levels will be critical to sustaining the economy’s growth momentum.
“The government’s ability to realize its infrastructure spending agenda will determine if the Philippines can achieve the growth target of 6.5-7.5 percent for 2017,” she said.
The government plans to boost infrastructure spending from 5.4 percent of GDP in 2017 to 7.4 percent of GDP by 2022, with total spending of P8.4 trillion on infrastructure planned over the 2017 to 2022 period.
The World Bank said consumption is anticipated to grow at a stable rate of 5.6 percent in 2017 and 6.1 percent in 2018, compared with 7.2 percent in 2016.
It pointed out that the prospect of maintaining consumption growth at current levels over the medium term is supported by robust remittance flows, which increased by 8 percent in the first quarter of 2017 from 3 percent a year earlier.
The bank also said continued economic growth is expected to lead to increased job opportunities, and sustained economic expansion has already begun to contribute to increasing incomes across all income groups.
“Between 2012 and 2015, household income among the bottom 40 percent of income distribution rose by an average annual rate of 7.6 percent,” it noted.
Lastly, the World Bank said as global economic activity and trade gradually improve, robust growth among the country’s main trading partners is expected to boost demand for Philippine exports.
Earlier, Credit Suisse also revised downward its growth forecast for the Philippines to 6 percent from 6.4 percent, saying it expected private consumption to moderate on the back of a weak labor market.
On the other hand, investment bank First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) see GDP growth hitting a higher rate of 7 percent this year despite the slower-than-expected 6.4 percent print in the first quarter.
ANZ Research kept its growth forecast at 6.9 percent, despite the lower-than-expected performance in the first quarter, saying overall growth is strong and balanced.
London-based research consultancy firm Capital Economics noted the economy is likely to continue growing at a solid pace of 6.5 percent, while DBS and IHS Markit maintained their respective forecasts at 6.4 percent.