World Bank keeps 5.7% PH growth outlook

June 12 ------ THE World Bank continues to forecast a lower-than-expected economic growth for the Philippines this year as it cites multiple concerns notwithstanding strong domestic activity.

In the latest edition to its Philippines Economic Update, the Washington-based lender maintained its 5.7-percent gross domestic product (GDP) growth outlook for 2022, which matched last year's rate. Its projection also fell short of the government's 7- to 8-percent adjusted GDP growth target this year. During a press conference, Ndiamé Diop, World Bank's country director for the Philippines, discussed the report and expressed confidence that the country can maintain robust growth this year and next. "Continuing growth this year will draw strength from greater mobility of people, wider resumption of face-to-face economic and social activities, including schooling, and strong public investments," he said. However, Diop cautioned that the global environment is currently very challenging, and that the country's baseline economic forecast is at risk.

Geopolitical instability exacerbated by the Ukraine conflict, global inflation that has risen from 2 percent to 6 percent in a year, interest rates rising from lows in the United States and Europe, and weaker growth momentum in China are among the challenges facing the Philippines, he added. "Prolonged war in Ukraine and sanctions on Russia could further disrupt global economic activity, slow down growth of major economies, and impair trade and financial flows," Diop warned. The World Bank said economic growth will average 5.6 percent over the next two years, which Diop pointed out could be sustained by more private investment and continued infrastructure investment. He said that putting recent reforms in place, such as the Retail Trade Liberalization Law and the Public Service Act amendment, will help new businesses and investments into crucial industries.

In light of the country's shrinking fiscal space, Diop believes private sector capital may be mobilized to sustain infrastructure investments, particularly provided financial risks to the government are handled and service affordability for citizens is ensured. "Indeed, despite recent improvements, infrastructure gaps remain a constraint to growth, service delivery, resilience and inclusion," he added. High economic growth, Diop stressed, will surely assist improve the fiscal position, but the development of debt is dependent on two factors: economic growth strength and budgetary discipline or consolidation. He explained that fiscal discipline entails collecting more income and spending more effectively in order to ensure that revenue growth in future national budgets exceeds expenditure growth. “In our baseline projections, we expect the debt-to-GDP ratio to converge back to its pre-pandemic level in the medium term, thanks to economic growth and fiscal discipline, which the Philippines' new economic managers have recently announced."

Source: manilatimes.net