Multilateral lender World Bank said the Philippines is poised to grow by 5.7 percent in 2022 as it takes the role of being one of the “key growth performers” in the Asia Pacific region this year.
The World Bank has also pegged the country’s economic growth for the next two years, starting next year at 5.6 percent, citing “intensifying global uncertainties.”
Kevin Chua, World Bank senior economist, said the external environments for the Philippines have turned “less favorable” just as the country weathered the worst of the coronavirus disease 2019 (COVID-19) pandemic.
Chua said the economy managed to grow 8.3 percent in the first quarter as “robust economic activity,” fueled by strong domestic demand and the recovery of the industry and services sectors, returned with the lifting of the severe movement restriction in the country’s economic main hub.
“Continuing growth this year will draw strength from an improving domestic environment, characterized by low COVID-19 cases, greater mobility of people, and wider resumption of economic and social activities,” he said.
The reopening is shoring up services, especially transportation, restaurant and food services, and wholesale and retail trade.
Prospects have improved for tourism following the opening of borders to vaccinated individuals, the reopening of tourist attractions and the relaxed travel requirements for travelers, the World Bank said.
Sustained public investments, along with recovering business activities, will boost the construction and industry sectors, it added.
Ndiamé Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand, said a continuity of reforms from the last six years promoting greater competition and attracting foreign investments will buttress the country’s growth outlook in the coming years.
“In the context of narrowing fiscal space, the authorities can encourage public-private partnerships to sustain improvements in the country’s infrastructure assuming financial risks to the government are managed and the quality of services for the citizens are secured,” he said.
Diop added that developing measures to reduce the budget deficit and the country’s debt will ensure long term fiscal sustainability.
These measures should focus on prudent spending, improved revenue collection through reforms in government procurement, and greater private sector financing to ensure that government allocations for education, health, other social services and infrastructure are not sacrificed, Diop said.
The World Bank noted the following risks to the country’s prospects: rising inflation, geopolitical uncertainty brought about by the Russian invasion of Ukraine, tightening global financing conditions and the weaker growth of trading partners like the United States and China, among others.
“While the country has entered a benign phase of the pandemic, the threat of a new variant-driven surge also hangs over the growth outlook,” it said.
According to the World Bank, a prolonged war in Ukraine and the continuing sanctions on Russia could also further disrupt global economic activity, slow down growth of major economies in the world, and impair trade and financial flows.
Chua said pursuing fiscal discipline, addressing rising inflation and its impact, and harnessing the digital economy are steps to promote macroeconomic stability and support long-term growth.
Taming inflation is also a pressing concern in order to combat its dampening effect on consumption, thereby worsening poverty, Chua added.
Likewise, announcing a fiscal consolidation plan will signal fiscal discipline and seriousness to address the narrowing policy space, he said.
The World Bank estimated that the direct effects of price variations on poverty show that a 10 percent increase in the global price of cereals is expected to raise the poverty headcount by 1 percentage point, pushing an additional 1.1 million Filipinos into poverty.
An increase of 10 percent in energy prices, on the other hand, is estimated to raise the poverty headcount by 0.3 percentage points, equivalent to an added 329,000 Filipinos into poverty.
“Authorities have to use all available policy tools to address inflation, including monetary measures to prevent the de-anchoring of inflation expectations, and supply-side measures such as importation and lower tariffs and non-tariff barriers for important commodities to help augment domestic supplies as needed, and greater support to agriculture production through extension services, seeds, and fertilizer,” said Chua.
The World Bank stressed the important role of social assistance in protecting poor and vulnerable households from high inflation and global uncertainties.
It added: “However, given the tight budget situation affecting the government, social assistance needs to be timely and targeted. Improving delivery of social assistance using digital technologies can ensure that assistance will reach those most in need.”
