By Elijah Joseph C. Tubayan
THE WORLD BANK expects the Philippines to sustain above-average economic growth in the next two years despite a global slowdown triggered largely by the trade spat between the world’s two biggest economies.
In the Global Economic Prospects published on Wednesday, titled: “Darkening Skies,” Washington-based multilateral lender expects the Philippines to have grown 6.4% in 2018 from 6.7% in 2017, and expects it to hit 6.5% this year — keeping its estimates from December.
It also kept its 6.6% forecast for 2020 made in an October regional report and gave a new estimate of 6.6% for 2021.
Compared to the June 2018 edition of the Global Economic Prospects — which is issued twice a year — the World Bank’s forecasts were lower by 0.3 and 0.2 percentage points, respectively, for 2018 and 2019.
The forecasts fall below the 7-8% target the government has set annually until 2022.
The World Bank’s latest estimates for the Philippines show that the country will weather the world GDP growth slowdown from 3% in 2018 to 2.9% this year and 2.8% in 2020 and 2021, as well as the East Asia and Pacific average of 6.3% in 2018, six percent in both 2019 and 2020, and 5.8% in 2021.
The regional outlook was kept from the October 2018 East Asia and Pacific Economic Update but the latest 2019 estimate is 0.1 percentage point lower than the projection in the June 2018 Global Economic Prospects report.
The Philippines will be among the fastest-growing countries in East Asia and the Pacific, roughly matching or outpacing China (6.5% in 2018, 6.2% in 2019 and 2020, and six percent in 2021) though slower than Vietnam (6.8% in 2018, 6.6% in 2019, and 6.5% in 2020 and 2021). In comparison, India in South Asia is estimated to have clocked 7.3% in 2018 and is expected to post 7.5% GDP growth annually from this year to 2021.
The report said that economic activity in the Philippines “has slowed as surging inflation, capacity constraints, and currency pressures have prompted authorities to hike policy rates,” which totaled 175 basis points from May to November.
It also noted that the 2018 growth outlook for commodity importers in the East Asia and Pacific, excluding China, “has been downgraded because of a moderation in private consumption amid rising inflation in the Philippines.”
Sought for further explanation, World Bank Senior Economist Rong Qian said that the Philippines’ robust economic base has shielded itself from external shocks, but still cited external and local risks.
“Philippines is fairly resilient to external shocks given its strong macroeconomic fundamentals such as having a flexible exchange rate regime, large foreign reserve, low external debt and large inflow of remittances,” she said in an e-mailed response to queries.
“Medium growth drivers include robust private consumption and public investment boost,” she added.
“Risks include uncertainties derived from US-China trade tensions that create uncertainty on the global growth outlook, persistent high inflation, although it seems to be declining already, and slower than expected public investment growth.”
The World Bank’s forecast compares with the Asian Development Bank’s 6.4% and 6.7% estimates for 2018 and 2019, respectively, the International Monetary Fund’s (IMF) 6.5% and 6.7%, and 6.7% of the Organization for Economic Cooperation and Development for both years.
Budget Secretary Benjamin E. Diokno noted that the World Bank’s estimates are “consistent” with the government’s targets, saying: “6.6% is still a very decent growth rate”
“In fact that’s one of the fastest growth rates in this part of the world, especially since the World Bank and the IMF are forecasting a global slowdown because of the trade war with China. It’s still early in the game for a downward adjustment. So were optimistic that we will still hit our seven percent,” said Mr. Diokno in an interview on Wednesday, adding that the impact on the Philippines of the raging US-China trade war will be “minimal” to “none, if at all” since “the Philippines is really not export-oriented country”.
Socioeconomic Planning Secretary Ernesto M. Pernia meanwhile said that latest policy moves should help boost economic growth.
“Our target is still to hit 7-8% economic growth this year and thereafter” Mr. Pernia said in a mobile phone message.
“We hope to counter global headwinds with strong domestic demand: BBB (Build, Build, Build) program, consumption (including election spending), domestic investment and FDIs (foreign direct investments) — the latter two helped by the EoDB (Ease of Doing Business) law and the reduced 11th FINL (Foreign Investment Negative List).”