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MANILA, Philippines – The World Bank sees the Philippine economy growing within or near targets this year and the next, but said growth would depend on the progress of rehabilitation efforts in Typhoon Yolanda-hit areas.
The multilateral lender cut its 2014 growth forecast for the Philippines to 6.6% from the previous 6.7% saying that damage caused by Yolanda (Haiyan) would likely pull down consumption.
However, it said “reconstruction spending can partially offset the decline” raising the country’s 2015 growth to 6.9% – higher than the World Bank’s earlier projection of 6.8%. (READ: Aquino: Yolanda rehab is top priority)
“These projections crucially depend on the speed and scope of the reconstruction program. In the short term, a well-designed and rapidly executed reconstruction program can boost economic growth beyond current projections,” said the bank in its Philippine Economic Update.
“Over the medium term, growth prospects can be enhanced by a sustainable ramping up of high-impact infrastructure spending.”
World Bank Country Director Motoo Konishi said in a separate statement, “over the coming years, a comprehensive agenda to support the revival of agriculture and manufacturing will strengthen the country’s resilience to calamities.”
“Reforms to secure property rights, enhance competition, simplify regulations, and increase investments in health, education and infrastructure will make this happen.”
The government is targeting growths of 6.5% to 7.5%, and 7% to 8% in 2014 and 2015, respectively.
In 2013, the Philippines exceeded expectations as it grew 7.2% despite a string of natural disasters.
“Higher growth was underpinned by the robust performance of consumption and services and supported by the expansion of investments and manufacturing,” the World Bank noted.
Sustained remittance inflows fueled household consumption in the country, while private construction benefited from low interest rates and strong demand for office spaces from the outsourcing industry. Improved efficiency of public infrastructure spending also contributed to growth.
The “risks to growth” in the next two years, according to the World Bank, include slower global recovery, which could affect exports; financial market volatilities stemming from the tapering of the US stimulus program; potential bubbles in the real estate sector; and slow Yolanda reconstruction.
‘Building back better after Yolanda’
Yolanda struck the Philippines in November, with around 8,000 people killed or still missing. It displaced over 4 million people and destroyed over half a million houses.
The government responded to the typhoon by rolling out immediate humanitarian aid and preparing a strategic plan to guide recovery and reconstruction in affected areas. The plan costs P361 billion (around $8 billion).
“Given the country’s ongoing vulnerability to disasters, the key challenge of the reconstruction process will be to develop and enforce explicit standards for building back better,” said the World Bank.
It urged the government to identify standards for safe and resilient buildings and infrastructure, and for risk-informed land-use planning.
It added an efficient and functioning market for housing materials and access to electricity and credit must be prioritized so affected households could rebuild their livelihoods. (READ: Coconut oil exports fall after Haiyan)
Job creation, poverty reduction
The lender emphasized the need to focus on creation of good jobs, which could reduce the vulnerability of millions of Filipinos to calamities and pull them out of poverty. (READ: More Filipinos jobless despite high growth)
It said more Filipinos have become poor because of the frequent occurrences of calamities.
“Moving forward, the country needs to continue focusing its attention on generating higher, sustained and more inclusive growth – the type that creates more and better jobs and reduces poverty,” the bank said. “With good jobs, Filipinos can increase their income, save more, and invest for the rainy days, thereby reducing vulnerabilities to calamities. – Rappler.com