The World Bank is keeping its 2018 and 2019 growth forecasts for the Philippines at 6.7 percent, with higher state spending expected to provide a buffer against rising global uncertainties.
In a statement on Friday, the multilateral institution said it had re-examined the expected drivers of gross domestic product (GDP) growth — used as the basis for an April country update — given latest available data.
“Given recent fiscal trends, government consumption growth was revised upwards, while private consumption growth is expected to expand at 5.9 percent in 2018 and 6.2 percent in 2019,” the World Bank said.
Higher capital outlays by the government, including that for the “Build Build Build” program, prompted a slight upgrade in expected investment growth.
Figures were not provided, but the April update had projected government consumption as growing by 8.9 percent and 7.1 percent, respectively, in 2018 and 2019, while private consumption was forecast to hit 5.8 percent and 6.2 percent.
“Overall, it is anticipated that real GDP growth will increase towards the end of 2018 and into the first half of 2019 with higher election-related spending,” the World Bank noted.
The Philippines will be holding mid-term elections in May next year with half of the seats at the Senate, the whole of the House of Representatives, and all local posts above the barangay level up for grabs.
“The government’s ability to carry out its investment spending agenda will determine if the Philippines can achieve its growth target of 6.5-7.5 percent over the medium term,” said Brigit Hansl, the World Bank’s lead economist for the Philippines.
“In addition, higher private investment levels will be critical to sustain the economy’s growth momentum as capacity constraints become more binding.”
The World Bank’s GDP 2018 and 2019 forecasts — lower than the government’s 7.0-8.0 percent target — mean that economic growth will stay unchanged from last year.
In its expanded April East Asia and the Pacific Update, the multilateral lender had said that any growth above 6.7 percent “would require vigorous investments in physical and human capital to push the economy beyond its current potential output”.
“Investment growth hinges on the government’s ability to effectively and timely implement the ‘Build Build Build’ public investment program,” it also noted then.
The April regional and country reports, which also forecast growth easing to 6.6 percent in 2020, said the Philippines would benefit from a global recovery even as exports would level off.
With global prospects having deteriorated since then, the World Bank said: “Exports, a key driver of growth for the Philippines economy, are projected to moderate in the coming years as global growth is expected to decelerate.
“Uncertainty around global growth conditions has risen”, it pointed out, “with the possibility of trade and other policy shocks emerging from major economies”.
The United States has just initiated a trade war against China and has also imposed protectionist measures against allies such as the European Union, Canada and Mexico. Financial markets worldwide have been rattled and warnings have been raised of a possible global recession.
The World Bank noted that as recently as June, it had projected a “gradual global slowdown over the next two years, predicted on moderately higher commodity prices, strong but gradually moderating global demand, and incremental tightening of global financing conditions.”
FROM A REPORT BY ED VELASCO