The World Bank said the Philippine economy will remain a top performer in the East Asia and Pacific region and will likely expand by close to 7 percent in the next two to three years, with infrastructure investment expected to sustain the country’s growth momentum.
Deutsche Bank however had a slower projection of above 6 percent growth for the Philippines in 2017 and 2018.
The Philippine economy grew 6.9 percent in 2016. This year, the government is aiming for 6.5 percent to 7.5 percent. For 2018 and 2019, the government is targeting a 7-percent to 8-percent gross domestic product (GDP) growth.
In its Philippine Economic Update, the World Bank retained its 6.9-percent 2017 growth projection for the Philippines.
In 2018 and 2019, the economy is projected to grow 6.9 percent and 6.8 percent, respectively, it said.
“Supported by sound domestic macroeconomic fundamentals and an accelerating recovery among other emerging markets and developing economies, the Philippine is expected to remain one of East Asia’s top growth performers,” Birgit Hansl, World Bank lead economist, said in a news briefing in Taguig City on Tuesday.
The Washington-based multilateral lender said the government’s commitment to further increase public infrastructure investment is expected to sustain the country’s growth momentum through 2018 and reinforce business and consumer confidence.
“The implementation of planned infrastructure projects could generate positive spillover effects for the rest of the economy, spurring additional business activity, accelerating job creation, and ultimately contributing to higher household consumption and poverty reduction,” Hansl said.
However, the World Bank report said the country’s growth prospects were subject to several important downside risks on the external and domestic front.
It said rising global interest rates could weaken the peso, adversely affecting capital flows to the Philippines and driving up domestic inflation.
“Commodity prices, specifically global crude oil prices, are projected to rise in 2017, which could also increase inflationary pressures,” said Hansl.
On the domestic environment, strong macroeconomic fundamentals have opened some fiscal space for the government to implement its public investment and social spending agenda, but the success and timeliness of the administration’s planned tax reforms will be vital to preserve fiscal sustainability.
“Planning and implementation bottlenecks could diminish the government’s ability to implement its planned infrastructure investment program,” Hansl said.
DB revises outlook
In a report, Deutsche Bank revised upward its 2017 growth outlook for the Philippines to 6.2 percent in 2017 from the previous forecast of 5.8 percent. It also has an upgraded outlook for 2018 of 6.5 percent from 5.7 percent.
These outlooks, the German financial institution said, were on account of a stronger-than-expected exports rebound.
“A major turnaround in exports has ensued in the Philippines, alongside the rest of EM [emerging markets]-Asia. After what seemed to be an unending period of falling revenues from May 2015 through August 2016, export earnings finally reverted to expansion territory, averaging 7 percent year-on-year in the five months through January,” the bank’s economist, Diana del Rosario, explained.
In what can be an early warning sign of private sector investment deceleration, however, business sentiment and investment pledges have fallen in the past two to three quarters.
“The sudden drop in capital goods imports (down 11 percent year-on-year- in January against +27 percent in the fourth quarter of 2016) alongside the downtrend in business sentiment and year-on-year declines in investment pledges in the past two quarters, under the new Duterte and Trump administrations, may be beyond coincidental, and warns of a softer private sector investment outturn going forward,” del Rosario said.