PH urged to guard against price bubbles

WB says developing nations face risk of overheating

The global economy is now poised to recover from a crippling crisis that started in 2008, with the Philippines and other developing countries driving expansion, according to a report from the World Bank.

In its latest “Global Economic Prospects” report, the World Bank cited signs of a stabilizing external environment and urged developing countries to shift its focus away from stimulating growth and prevent their respective economies from overheating.

The World Bank said that several Southeast Asian countries are now operating either close to or above full capacity, and are being threatened by asset price bubbles and faster inflation.

It is keeping its growth projections for the Philippines at 6.2 percent this year and 6.4 percent in 2014. For 2015, the World Bank said it expected the country to grow by another 6.4 percent.

Analysts from various institutions earlier said that the Philippines’ growth potential was within the 4- to 5-percent range. They believe that the growth rates of 6.8 percent last year and 7.8 percent in the first quarter of this year are above the country’s growth potential and could be inflationary.

But the Bangko Sentral ng Pilipinas believes otherwise, saying that the country’s growth potential is within the 6-percent territory.

Policymakers in fast-growing Asean (Association of Southeast Asian Nations) economies, including Indonesia, Malaysia, Thailand, and the Philippines, “should be focusing their actions on avoiding overheating and rebuilding fiscal and monetary buffers,” the World Bank said.

Inflation in many developing Asian countries, including the Philippines, remains modest, but this suggests the need for measures to temper a potential surge in the rate of rise of consumer prices, the multilateral lender said.

The entire East Asian region is estimated to grow by 7.3 percent this year, and 7.5 percent in 2014 and 2015, the World Bank said. Apart from the Philippines, other countries driving the region’s growth are China, Indonesia, Cambodia, Laos and Myanmar—all of which are expected to grow by more than 6 percent this year until 2015.

In contrast, the global economy is seen to grow by an average of 2.2 percent this year, and 3 percent in 2014 and 2015. Although the estimates are modest, the World Bank said these reflect a trend toward stabilization.

“The global economy appears to be transitioning toward a period of more stable, but slower growth,” it explained.

The United States, the euro zone, and Japan are expected to post moderate growth rates and will stay on the path of recovery.

The United States is seen to grow by 2 percent this year, 2.8 percent in 2014, and 3 percent in 2015.

The euro zone is expected to contract by 0.6 percent this year, but may grow by 0.9 percent next year and by 1.5 percent in 2015.

Japan is estimated to grow by 1.4 percent this year and in 2014, and by 1.3 percent in 2015.

Also, the measures implemented by Japan to boost its economy appear to have varying effects on neighboring countries, the World Bank said. Because of the infusion of liquidity by its central bank, Japan saw a rise in exports resulting from a weakened yen.

For the Philippines, the World Bank said, a depreciating yen and growing Japanese exports would be beneficial. This is because bulk of the Philippines’ exports to Japan is composed of raw material and intermediate goods, which are used as inputs for Japanese goods.

But for other Asian countries, a weakening yen and strengthening Japanese exports will mean stiffer competition. –Michelle V. Remo, Philippine Daily Inquirer