Increase infrastructure spending, World Bank tells PHL

To sustain the upward momentum of the country’s economy, the World Bank has urged the Philippines to increase its infrastructure spending.

In a report, the Washington-based lender said it has maintained the economic growth forecast of 6.2 percent for the Philippines for this year as it expects strong domestic demand, coupled with higher remittances to buoy growth. Next year the country’s economic growth was projected to grow by 6.4 percent.

“In the Philippines catching up on government infrastructure spending will provide the fiscal spark that is still missing in the country’s growth path, although infrastructure spending is gearing up recently,” the World Bank said in its report, titled “East Asia and Pacific Economic Update.”

The World Bank also said the Philippine government needs to pursue “productive investment.” It said investment efficiency, measured in terms of the investments needed for an increase in gross domestic product, has deteriorated in the last decade in Malaysia, the Philippines, Vietnam and Thailand.

Driven by strong domestic demand, the World Bank said the economies of developing East Asia and Pacific continue to be an engine of global growth, growing at 7.5 percent in 2012—higher than any other region in the world.

As the global economy recovers, the report projected that regional growth will rise moderately to 7.8 percent in 2013 and ease to 7.6 percent in 2014.

“The East Asia and Pacific region contributed around 40 percent of global growth in 2012, and the global economy continues to rely on the region’s growth, with investor confidence surging and financial markets remaining solid,” said World Bank East Asia and Pacific Vice President Axel van Trotsenburg.

“Now is the time for countries to focus on helping the remaining poor, with more and better quality investments to accelerate inclusive growth,” he said.

Fiscal and monetary policies to boost consumption and investment helped sustain growth in 2012 across the region, with middle-income countries performing particularly well. Developing economies excluding China grew 6.2 percent in 2012, up from 4.5 percent in 2011. The World Bank said risks emanating from the euro zone and the US have declined since the middle of last year. Its baseline projections for global growth are for a modest expansion of 2.4 percent in 2013 and a gradual strengthening to 3.0 percent in 2014.

“While still fragile, there are signs of a turnaround in real activity in high income economies, thus external demand for the East Asia and Pacific region’s exports will stabilize this year,” the report read.

As the global economy recovers, the World Bank said an emerging issue is the risk of overheating in some of the larger economies. The latest numbers suggest that, if global demand continues to revive, some major economies may reach the limits of their current production capacity, as the output gap has closed in those countries. –Jennifer A. Ng | Reporter, Businessmirror