WB forecast raised anew

ANOTHER multilateral institution has raised its Philippine growth forecast amid global uncertainties that have prompted reduced estimates for the region.

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In an update to its East Asia and Pacific outlook, the World Bank yesterday said it expected the country to post gross domestic product (GDP) growth of 5.0% this year, higher than the revised 4.6% — from 4.2% previously — announced in July.

“In the Philippines, the acceleration of government infrastructure spending has contributed to the strong growth performance in the first half, while revenue growth is supported by tax administration reforms as well as strong GDP growth,” the World Bank noted.

The new estimate is at the lower end of the government’s 5-6% target for the year. After 2011’s lackluster 3.7% result, GDP growth has since accelerated, hitting 6.1% in the first half of 2012 on the back of a government spending rebound.

A upgraded GDP growth forecast, to 5.5% from 4.8%, was similarly announced last week by the Asian Development Bank, which also cut its outlook for developing Asia.

Both expect Philippine growth to moderate to 5% next year.

For the East Asia and Pacific (EAP) as a whole, the World Bank said it was cutting its growth outlook for the year to 7.2% from 7.6%, noting continued woes in the United States and Europe.

“Real economic activity in advanced economies continues to disappoint… resulting in weak demand for EAP’s exports,” it said.

The World Bank warned that a slowdown in China could worsen, with the economic giant now expected to grow by 7.7% instead of 8.2% this year, much slower than 2011’s 9.3% result.

“Unlike the rest of the region, China is experiencing a double whammy — the growth slowdown is driven by weaker exports as well as domestic demand, in particular investment growth,” said Bert Hofman, World Bank chief economist for the region, at a briefing in Singapore.

Mr. Hofman also said the World Bank’s 7.2% estimate for the EAP “is the slowest growth rate in the Asia-Pacific region since 2001. It’s even slower than the peak of the financial crisis in 2009”.

The World Bank was bullish about Southeast Asia due to strong domestic demand and it noted that investment spending in Thailand, Malaysia and Indonesia was booming.

The multilateral lender kept its 2012 GDP forecasts for Indonesia and Thailand at 6.1% and 4.5%, respectively, and raised its 2012 growth outlook for Malaysia to 4.8% from 4.6%.

Sought for comment, University of the Philippines economist and former Budget secretary Benjamin E. Diokno said the 2012 forecast for the Philippines reflected the first-semester’s better-than-expected result and a likely second-half easing.

“The adjustment is in response to the strong first-half number. But given the revised forecast, WB is expecting a slower GDP growth in the 2nd semester,” Mr. Diokno said in a text message.

“This raises the question of sustaining a strong growth in the face of deteriorating global economy,” he added.

Malacañang, however, was optimistic.

“Growth will be sustained through a combination of stimulus spending, private sector investment, and consumer spending,” Secretary Ramon “Ricky” A. Carandang of the Presidential Communications Development and Strategic Planning Office said in a separate text message. — with reports from Reuters and Noemi M. Gonzales, SIEGFRID O. ALEGADO, Reporter, Businessworld