The World Bank on Monday maintained its 6.4-percent growth forecast for the Philippines in 2016, on the back of robust private consumption and strong public spending ahead of the national elections in May.
“Faster growth in 2016 would be driven by robust private consumption, aided by low inflation and spillovers from increased spending due to the upcoming general elections,” World Bank Philippines senior country economist Karl Chua said.
The Washington-based multilateral lender said it expected the country’s gross domestic product growth rate to ease to 6.2 percent in 2017 and 2018.
The economy expanded 5.8 percent in 2015, slower than the 6.1-percent growth in 2014 and 7.1 percent in 2013.
The World Bank lowered its growth forecast for this year for developing East Asia and Pacific countries to 6.3 percent from 6.4 percent. Growth is set to ease from an estimated 6.5 percent in 2015, it said.
For China alone, the World Bank is forecasting 6.7-percent economic expansion this year, unchanged from its October estimate. Excluding China, the region is projected to grow 4.8 percent this year, up from 4.7 percent in 2015 and 0.1 percentage point lower than previously predicted.
In Southeast Asia, the biggest downgrades in growth forecasts were for Indonesia and Malaysia, both commodity exporters. Indonesia—estimate for 2016 was lowered by 0.2 percentage points to 5.1 percent, while Malaysia was cut by 0.3 points to 4.4 percent.
The largest forecast upgrade was for Thailand, with the World Bank now projecting expansion of 2.5 percent this year, up from 2 percent in the earlier report.
While developing nations in East Asia—from Indonesia to China—have benefited from careful economic policies, global risks are considerable and threaten the region—outlook, the lender said. Among these are a slowdown in high-income countries, the slump in exports and financial market volatility.
The World Bank said among the developing Southeast Asian economies, the Philippines had one of the strong growth prospects along with Vietnam, which was expected to grow 6.7 percent this year.
Chua said investments would likely support growth in the Philippines as the implementation of the key public-private partnership projects accelerated.
The bank said election related spending would spur private consumption, contributing 1 percentage point in the country’s growth in the first semester of 2016.
“Growth this year will be supported by stronger government spending related to the election which could stimulate private consumption and in turn increase GDP growth by 1 percentage point in first half of 2016,” the World Bank said.
“In the Philippines there is a lot of election spending which boosts demand, and that that is one of the reasons that growth should be reasonably robust,” World Bank chief economist for East Asia and the Pacific region Sudhir Shetty said via a video conference from Washington D.C.
Chua said despite the strong economic performance of the Philippines amid the external volatilities, there were still risks to growth, including the uneven recovery of high income economies, the slower-than-anticipated growth of large emerging market economies and slower remittances from oil exporting economies.
Financial market volatilities, the continuation of the El Ni dry spell in the first semester, the delays in the infrastructure projects implementation and the uncertainty of the upcoming election were also seen as possible risks to the sustained growth.
The Philippines continued to deepen macroeconomic stability, promoted transparency and put a lot of resources in infrastructure and services that helped poor and vulnerable families, said World Bank country director Mara Warwick.
“The country can make further strides in poverty reduction if it can enhance competition in sectors that can create more and better jobs like rice, shipping and telecommunications; simplify business regulations to encourage more entrepreneurs to set up shop; and improve people access to land through better adjudication of land rights,” Warwick said.
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