Higher 2010 growth seen by World Bank

THE WORLD BANK has again revised its 2010 growth estimate for the Philippines, raising it to 6.8% from the 6.2% outlook issued last October.

The adjustment, contained in the bank’s Global Economic Prospects Report that was released yesterday, is higher than the government’s 5-6% target — widely expected to have been breached last year given the 7.5% average as of September.

The Philippine forecast is below the bank’s estimate of 9.3% for East Asia and the Pacific but well above projected global growth of 3.9%.

It also compares to the International Monetary Fund and Asian Development Bank outlooks of 7% and 6.8%, respectively.

The Washington-based institution, however, maintained that gross domestic product (GDP) growth would ease to 5% this year, below the government’s 7-8% target, before rising slightly to 5.4% in 2010.

Growth for the Philippines and other East Asian economies, it said, will moderate “as the world economy moves from a post-crisis bounce-back phase.”

“[Philippine] GDP growth has been stronger than expected, reflective of rapid recovery and election-related spending amidst a strong external position which has led to a sovereign credit rating upgrade in November by Standard & Poor’s,” World Bank senior economist Eric Le Borgne was quoted as saying in a statement.

The outlooks for 2011 and 2012 were described as a normalization and Mr. Le Borgne said, “Crucial to this projection is the assumption that strong investor confidence … would be sustained by government’s efforts to step up reforms in the areas of governance and in improving overall investment climate.”

He said the Philippines remained exposed to slowdown risks from developed countries that are markets for its exports, but added that the industry outlook remained strong.

“Forward looking indicators in the electronics and semiconductor sector are positive, albeit slightly down in the past quarter,” Mr. Le Borgne said.

“On the services said, the business process outsourcing industry is booming and despite concerns … [over the impact of a] sharp and pronounced appreciation of the peso … the sector’s short term growth prospects are favorable.

Food price shocks were also seen as posing a risk but rice supply constraints were not expected in the near-term given “decent” palay production in the latter part of 2010 and ample stockpiles.

Mr. Le Borgne said he expected “some unwinding” of fiscal easing this year and also noted that the government remained “able to access markets at historically low spreads.”

“Liquidity is abundant so downside risks are also limited in this area. On the monetary policy side, while stronger and faster fiscal consolidation would help … a measured unwinding is expected throughout 2011 in line with other emerging markets’ central banks. Limited inflationary pressures and well anchored inflation expectations would enable the BSP (Bangko Sentral ng Pilipinas) to follow such path for 2011.”

In explaining the lower 2011 outlook, Mr. Le Borgne noted the government’s refusal to raise taxes and the time it would take before the effects of public-private partnership (PPP) projects kick in.

“Increase in revenue is fundamental and needed,” he said. “I don’t think it’s coming for 2011.”

Finance Undersecretary Gil S. Beltran, however, said the government remained confident that economic growth would be spurred by private sector activity.

“This time around, we are aiming for more private-sector oriented growth through PPP,” he said.

The government will continue to focus on tax administration and expects an additional P27 billion and P9 billion this year from the tax and customs bureaus, Mr. Beltran added.

National Economic and Development Authority Deputy Director General Augusto B. Santos, meanwhile, said any change in the 2011 growth target would depend on final data for last year.

“There is a possibility that it (the goal) can go down but there is there a possibility that we can maintain the 7-8% for 2011,” he said. “If the ground is strong in the fourth quarter of 2010, we will maintain that.” — J. J. A. Cerda, Businessworld