MANILA, Philippines – The World Bank has raised its growth projection for the Philippines this year, but warned of “headwinds” from the global economic slowdown.
The multilateral lender now sees the Philippine economy growing 4.6% in 2012, up from an earlier forecast of 4.2%. The upgrade reflects the economy’s better-than-expected 6.4% growth in the first quarter, it said.
“Growth will be driven by higher government spending, given continuing improvements in the efficiency and pace of disbursements,” the World Bank said in its Philippine Quarterly Update released Thursday, July 19.
“Remittances are also expected to continue to grow, albeit at a slower rate. Services will remain stable, supported by additional employment from the business process outsourcing industry,” it added.
However, it said that the latest projection does not factor in “possible intensification” of the global downturn, which may affect demand for the country’s exports, a major driver of growth.
Growth rates of the Philippines’ major export markets are expected to “remain anemic,” with the euro zone projected to suffer a 0.3% decline in real gross domestic product. China’s economy is also expected to further slow down, the World Bank said.
“This global slump may intensify, affecting some sectors in the Philippine manufacturing industry such as electronics, causing job losses.”
To mitigate this, the lender urged the government to raise more revenues and increase investment in infrastructure and social services.
“Improved resource mobilization will not only help brace the economy against a prolonged global economic slump, but also enable the government to make the necessary investments in the physical and human capital needed to underpin a more inclusive growth pattern and make the country more competitive,” said Rogier van den Brink, World Bank Lead Economist for the Philippines. “In this regard, the investment climate for firms of all sizes needs to continue to improve, so that the private sector can generate more and better jobs for all.”
The Philippines grew 6.4% in the first quarter, the fastest in the region next to China, thanks to a strong services sector, which got a boost from high tourist arrivals.
The government has a growth target of 5% to 6% this year, but said it may exceed it on anticipated higher spending and recovery of exports.
Exports were down for most of 2011, but bounced back early 2012, growing by an average of 8.4% in the first 5 months. – Rappler.com