World Bank sees below-target GDP growth for Philippines in next 3 years

by Ben O. de Vera, Philippine Daily Inquirer, Jan 9, 2019

The World Bank has projected the Philippines’ gross domestic product (GDP) growth at 6.5 percent this year, below the government’s 7-8 percent target for 2019, and slightly up to 6.6 percent in 2020 and 2021.

This while it expects global economic growth to slow to 2.9 percent this year as international trade and manufacturing face risks from trade tensions between the US and China.

In a report titled “January 2019 Global Economic Prospects: Darkening Skies” released January 8, the Washington-based multilateral lender said “the outlook for the global economy has darkened” this year.

“Global financing conditions have tightened, industrial production has moderated, trade tensions have intensified, and some large emerging market and developing economies have experienced significant financial market stress,” the World Bank said.

“Faced with these headwinds, the recovery in emerging market and developing economies has lost momentum. Downside risks have become more acute and include the possibility of disorderly financial market movements and an escalation of trade disputes,” it added.

As such, the World Bank sees global growth in 2019 further softening from the downgraded projection of 3-percent expansion in 2018.

For the World Bank, growth in emerging market and developing economies would be a “weaker-than-expected” 4.2 percent this year, outpacing a drop to 2 percent across advanced economies.

In the case of the Philippines, a developing economy, the World Bank said its GDP would likely grow at 6.5 percent this year.

Last December, the World Bank cut its 2018-2019 growth projections for the Philippines due to high inflation, which tempered private consumption, a major driver of the domestic economy.

“In the Philippines, activity has slowed as surging inflation, capacity constraints, and currency pressures have prompted authorities to hike policy rates,” the World Bank noted in its latest report. The Bangko Sentral ng Pilipinas (BSP) last year hiked key interest rates by a total of 175 basis points to address faster-than-expected inflation.

The World Bank’s 2018 growth forecast for the Philippines was 6.4 percent. The government will announce the full-year 2018 GDP performance on January 24.

The GDP grew 6.7 percent in 2017 and 6.9 percent in 2016.

For 2020 and 2021, Philippine economic growth was seen by the World Bank inching up to 6.6 percent in both years, still below the medium-term 7-8 percent goal. /kga