THERE are solid reasons why foreign and domestic investors are upbeat about the Philippine economy and Philippine enterprises, and why the Philippine Stock Exchange recently reached new records in trading. Before the new year is over, new ceilings could be reached.
In its Global Economic Prospects report released on Wednesday, January 10, the World Bank projected that the Philippines will continue to outpace its Southeast Asian neighbors in terms of economic growth, based on its estimates for 2018 up to 2020.
The multilateral finance institution sees the Philippine economy as consistently growing by 6.7 percent from 2017 to 2019 before tapering off to 6.5 percent in 2020.
The World Bank said the Philippines can sustain strong growth through several policy reforms such as lowering of non-tariff barriers and easing restrictions on foreign control and ownership of businesses.
It added that the Philippines is now seeing a rise in young working age population and should take advantage of this huge demographic base by strengthening the quality and flexibility of its education system and strengthening the ability of its workforce to adopt new technology.
On average, the World Bank expects Philippine GDP to grow by 6.6 percent from 2018 to 2020, higher than Thailand’s 3.5 percent, Vietnam’s 6.5 percent, Indonesia’s 5.3 percent and Malaysia’s 4.9 percent.
Higher growth was forecast for Cambodia (6.7 percent), Laos (6.8 percent) and Myanmar (6.8 percent).
Overall, the bank was very positive about economic growth in the entire Asean region.
The World Bank earlier upgraded its 2017 Philippine growth forecast to 6.7 percent from 6.6 percent, as it took into account a stronger-than-expected third quarter expansion.
The updated forecast, which falls within the government’s 6.5-7.5 percent target, is lower than last year’s actual 6.9-percent growth.
The multilateral lender said that continued global economic recovery had led to higher than expected export growth.
The Philippine economy expanded by a better-than-expected 6.9 percent in the third quarter. Results for the second quarter were also revised upwards and year-to-date growth, at 6.7 percent. This has kept the country on track to hit its 6.5-7.5 percent target.
The bank expects the global economy to grow at a slightly faster pace of 3.1 percent in 2018, from three percent in 2017, as recovery in investments, manufacturing and trade continues.
Growth in advanced economies – US, Eurozone and Japan – is projected to moderate to 2.2. percent in 2018 from 2.3 percent in 2017 as central banks move toward policy normalization post-financial crisis. Growth in emerging market and developing economies – which include the Philippines – as a whole is projected to strengthen to 4.5 percent in 2018, as activity among commodity exporters continue to recover.
“The broad-based recovery in global growth is encouraging, but this is no time for complacency,” said World Bank Group president Jim Yong Kim.
“This is a great opportunity to invest in human and physical capital. If policy makers around the world focus on these key investments, they can increase their countries’ productivity, boost workforce participation, and move closer to the goals of ending extreme poverty and boosting shared prosperity.”
The bank said 2018 would be the first year since the financial crisis that the global economy would be operating at full capacity. With slack in the economy expected to dissipate, it said policymakers would need to look beyond monetary and fiscal policy tools to stimulate short-term growth and consider initiatives more likely to boost long-term potential.
Explaining the trend in GDP growth, the World Bank said: “A simultaneous recovery in major advanced economies and in developing economies is boosting global trade. For the Philippines, this means stronger demand from main trading partners such as the United States, Japan and Europe.”