RP economy to grow 4.4% this year — WB

July 14, 2010 10:06 pm 

MANILA, July 14 — The World Bank revised upward on Wednesday its projection on the country's economic growth from this year until 2012 on strong private and public spending as well as the global recovery in trade.

In its latest issue of the Philippines Quarterly Update (PQU), the Manila-based lender upgraded the gross domestic product (GDP) forecast to 4.4 percent this year from an earlier projection of 3.5 percent.

An indicator of economic performance, GDP measures the amount of final goods and services produced in a country.

For the years 2011 and 2012, the Philippines is forecast to achieve a GDP growth of 4 percent.

The lender's upward revision for Philippine economy came on the heels of a series of adjustments from International Monetary Fund and Fitch Ratings, among others.

The Philippine economic managers earlier upgraded the GDP target this year to between 5 and 6 percent from 2.6 to 3.6 percent.

The World Bank's GDP revision for the country was based on the strong first quarter growth performance and leading economic indicators.

The economy, as measured by GDP in the first quarter, grew 7.3 percent from 0.5 percent in the same period last year.

The report said private consumption will continue to normalize as consumer sentiment continues to improve.

"An election-driven consumption and budget cycle is observable in the Philippines … We therefore project consumption to remain robust in the second quarter before normalizing in subsequent quarters," the World Bank said.

The report noted that the country’s growth potential could be much higher given the new administration’s strong reform and anti-corruption agenda that could shore up business confidence.

Eric Le Borgne, World Bank senior economist, said the Aquino administration’s focus on increasing the efficiency of revenue collection and expenditures is welcome in that regard and is expected to generate important fiscal space.

“The government would need more funds for education, health, and other social programs so that marginalized sectors could equitably share in the benefits of growth in a sustainable way," he said.

Le Borgne added that while large fiscal risks in some European countries have dampened growth prospects in that region, the global growth outlook remains favorable, especially for emerging markets, including the Philippines.

"Domestic reforms would be a catalyst for higher growth,” he said.

The report also forecasts dollar remittances from overseas Filipino workers (OFWs) to increase by 8 percent this year but to be almost flat in real peso terms because of inflation and an appreciated peso compared to last year.

It said that deployment of OFWs actually accelerated during the recent global financial crisis partly because top OFW destinations were not as affected as the rest of the world.

The World Bank report also said that the European sovereign debt problems loom as a fresh threat to the global economic recovery, but improving the Philippines’ public finances will strengthen the country’s economic defenses against its potential impact as well as improve government spending for pro-poor programs.

Early this year, concerns about rising indebtedness in European countries, including Greece, Spain, and Portugal, had generated fears that the global economy might slide back to recession and cause further difficulties in developing countries like the Philippines.

“A credible plan towards fiscal consolidation over the medium-term — along with measures to manage fiscal risks — would significantly reduce the Philippines’ exposure to the worsening European debt problems,” the report said.

“Such credibility could be achieved, for example, by designing a comprehensive and multi-year reform package,” it added.

The World Bank said stronger public finances inspire confidence of the financial markets, create policy flexibility to tackle global downside risks, and boost economic growth. (PNA) scs/DGA/rsm

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