PHL to notch above 6% growth in next three years–World Bank

The Philippine economy is expected to post growth of above 6 percent in the next three years, according to the World Bank.

In its Global Economic Prospects (GEP) report, the Washington-based lender said the economy is expected to post a 6.4-percent growth in 2016 on the back of the May elections. Growth, however, is expected to ease in 2017 and 2018 to around 6.2 percent.

“In the Philippines, growth is projected to firm to 6.4 percent in 2016, reflecting accelerated implementation of public-private partnership [PPP] projects and spending related to the May 2016 presidential election. In 2017 to 2018, growth is forecast to ease to 6.2 percent,” the World Bank said.

The global lender said the projections for 2016 and 2017 were both reduced from the June 2015 expectations of the bank.

Growth expectations were reduced by -0.1 percentage points each from 6.5 in 2016 and 6.3 in 2017.

The World Bank also significantly reduced its growth forecast for the Philippine economy in 2015 to only 5.8 percent.

The forecast was reduced by 0.7 percentage points from the bank’s 6.5-percent estimate in June 2015.

“Among the large developing Asean economies, growth in the Philippines and Vietnam will benefit from rising household incomes caused by low commodity prices, a diversified and competitive export base [Vietnam], and investment driven by robust FDI [foreign direct investments] flows. Risks to the outlook remain tilted to the downside, stemming from a larger-than-expected slowdown in China and tightening global financing conditions,” the World Bank said.

The growth of the Philippine economy, the World Bank said, will be driven by domestic demand, particularly due to low food prices.

The bank said that while domestic demand remains low compared to precrisis levels, emerging economies, like the Philippines, Pakistan and India, where food accounts for the largest share in consumption, will continue to see domestic demand grow.

This has caused a significant reduction in headline inflation, which continued to boost consumption growth. In the Philippines inflation averaged 1.4 percent in 2015, the lowest in more than a decade.

In 2015 the Philippine Statistics Authority (PSA) stated, the country’s headline inflation rate slowed to 0.4 percent last September and October mainly due to cheaper food and oil prices.

The country’s annual average rate of the Food Alone index in the Philippines slowed to 2.6 percent in 2015, from 7 percent in 2014. It can also be noted that food inflation averaged 0.7 percent, the lowest in 2015, during September and October.

Among the food items, the country’s staple, rice and corn, posted low inflation rates in 2015. Rice prices contracted 2.6 percent in 2015, even lower than the contraction of 2.4 percent in 2014.

Corn prices, meanwhile, posted a slightly higher increase of 0.4 percent in 2015 compared to flat growth in 2014.

“Partly reflecting uncertainty about the outlook, consumption growth remains below its precrisis and long-term averages, despite the increased real incomes due to declines in food inflation and oil prices. In several countries, these developments have sharply reduced headline inflation, especially in countries with a large share of food in their consumption baskets,” the World Bank added.

However, the World Bank said that in terms of FDI, the Philippines continued to lag behind its neighbors.

Indonesia, the World Bank added, saw its highest FDI inflows since 1990, both in dollar terms at $23 billion and relative to GDP at 3 percent.

Thailand, another Asean country, saw its FDIs rise to precrisis levels in 2014. Further, in Vietnam, FDIs continued to be robust and were directed to labor-intensive manufacturing production.

“In the Philippines FDI has lagged, partly owing to regulatory restrictions,” the bank said.

Developing economies are forecast to expand by 4.8 percent in 2016, less than expected earlier but up from a post-crisis low of 4.3 percent in the year just ended.

Growth is projected to slow further in China, while Russia and Brazil are expected to remain in recession in 2016. The South Asia region, led by India, is projected to be a bright spot. The recently negotiated Trans-Pacific Partnership could provide a welcome boost to trade. –Cai U. Ordinario, Businessmirror