WB sees moderate growth of 5% in 2011

MANILA, Philippines – The World Bank (WB) forecasts the Philippine economy to grow around 5 percent in 2011 and 5.4 percent in 2012, but could be higher if investment climate continues to improve.

In its Philippine quarterly update (PQU), the WB noted that the economic growth of 7.3 percent in 2010 – the highest in 34 years – was attributed to the rebuilding of inventories by firms after the global financial crisis, the recovery of exports and manufacturing, accommodative monetary and fiscal policies and election spending.

The WB expects the record growth may moderate as some of these temporary factors disappear and the government’s policy stimuli are gradually withdrawn.

World Bank Country Director Bert Hofman said: “Strong private investment in the fourth quarter of 2010 and bullish business confidence are encouraging signs that the economy can attract investments needed to boost potential growth and generate more jobs.”

“The outlook for both consumers and business is encouraging,” said World Bank Senior Economist Eric Le Borgne. “Net exports are also projected to remain strong thanks to exports diversification and robust outlook for the electronics industry.”

On the supply side, the services sector will remain the main driver of growth, followed by industrial production.

Barring any major calamity, the agricultural sector should positively contribute to growth this year as the first three quarters of 2010 were negatively impacted by El Niño.

“Government efforts to improve the investment climate, tackle corruption and weak governance, along with more credit-rating upgrades could boost investor confidence and attract more private investment in the next few years,” Mr. Le Borgne added.

“Sectors with high-growth potential include the business process outsourcing and tourism.”

The WB report identified downside risks that could weigh down future growth: Rising international oil and global food prices. –EDU LOPEZ, Manila Bulletin