The World Bank (WB) raised its growth forecast for the Philippines this year on expectations the country will produce more jobs and reduce poverty.
In its East Asia and Pacific Economic Update report, the WB said it expects Philippines growth to hit 7 percent this year, higher than the 6.2 percent it earlier projected.
It also revised its growth forecast for the country next year from 6.4 percent to 6.7 percent.
Motoo Konishi, World Bank Philippines director, said “reforms to enhance competition, protect property rights, simplify business regulations, and increase investment in infrastructure, education and health will boost the Philippines’ efforts to achieve inclusive growth—the type that creates more jobs and reduces poverty.”
Bert Hoffman, World Bank chief economist, said the country should raise the budget to be able to finance its development.
“[Government budget is] still not enough to keep the Philippines growing in the medium term. [The country should] bring in some additional revenues; more revenues to have sustainable growth and financing in infrastructure,” Hoffman said in a live stream from Singapore.
He added that the Aquino government should “restructure” its policies and keep its “inclusive growth agenda.”
In the Asian region, only the Philippines posted an impressive growth, exceeding targets by 0.8 percent for 2013 and 0.3 percent for 2014, the World Bank said.
Majority of the East and Southeast Asian countries did not meet economic targets for years 2013 and 2014, it said.
Despite the optimism, the World Bank said uncertainties in advanced economies such as the potential asset bubbles in the real estate sector, domestic reform lags, “economic slowdown and financial market volatility of high-income countries” could slow the Philippine economy.
It said “financing for real estate” as well as “reforms to raise tax revenues” could pull down infrastructure spending.
The World Bank suggested that the government increase overall “investments” of human and physical capital to build up the labor force.
Rogier van den Brink, World Bank Philippines lead economist, said the country should “open up” the economy to new entrants to give micro, small and medium enterprises (MSME) or small businesses the competitive boost.
MSMEs “fail to grow every year” because of anti-competitive practices and red tape, among others reasons, van den Brink said.
He said that the administration should look at the property rights, complexity of rules and regulations in taxes that should be “simplified” and be “transparent” to ease the process of doing business in the country.
It must also attract foreign investments as increasing wages in neighboring countries tend to push investors to find other potential areas for expansion, he added.
The Asian Development Bank also raised its 2013 Philippine GDP growth forecast from 6 percent at the start of the year to 7 percent. It also revised its 5.9 percent growth projection for 2014 to 6.1 percent.