BY MAYVELIN U. CARABALLO, TMT BUSINESS
THE World Bank retained its Philippine growth forecast at 6.9 percent this year, citing positive developments that would buoy the economy, the Washington-based lender said in a report Monday.
In the Philippines, expansionary fiscal policy has boosted capital formation, while robust remittances, credit growth and low inflation have supported private consumption, according to the Global Economic Prospects describing economic developments in early this year.
The Philippine economy grew 6.4 percent in the first quarter of 2017, a tad below the government target of 6.5 percent to 7.5 percent.
Fiscal spending on infrastructure and other capital expenditures grew by 12.2 percent to P175.5 billion in the first three months of the year, from P104.8 billion a year earlier, on account of the armed forces modernization program and road infrastructure and health projects.
Bank lending expanded by 15.6 percent in April as loans for production activities increased, while inflation settled at 3.2 percent on average in the first four months of the year compared with government’s target of 2 percent to 4 percent.
In the April edition of Philippine Economic Update, the World Bank said the Philippine economy will remain a top performer in the East Asia and Pacific region and likely expand by nearly 7 percent in the next two to three years, with infrastructure investment to sustain the growth momentum.
In 2018 and 2019, the World Bank projected the economy growing by 6.9 percent and 6.8 percent, respectively.
The commitment to increase infrastructure investment is expected to sustain the country’s growth momentum through 2018 and reinforce business and consumer confidence.
However, the World Bank said the growth prospects were subject to downside risks on the external and domestic fronts.
Rising global interest rates could weaken the peso, adversely affecting capital flows to the Philippines and driving up inflation.
Strong macroeconomic fundamentals opened some fiscal space for the government to implement public investment and social spending, but the success and timeliness of the administration’s planned tax reforms are vital to preserve fiscal sustainability.
Most private financial and research institutions also retained their growth forecasts this year after the first quarter GDP numbers were released last month.
ANZ Research held forecast at 6.9 percent, noting that despite missing expectations overall growth is running strong and balanced.
London-based research consultancy firm Capital Economics said despite the slowdown in January to March, the economy is likely to continue growing at a solid pace of 6.5 percent.
DBS also maintained the GDP growth may moderate to 6.4 percent this year.
IHS Markit is forecasting that the economy will grow by 6.4 percent year-on-year, marking the sixth successive year of rapid expansion.