WB: PHL economy to grow 5% this year, lower than gov't forecasts

The Philippine economy will grow at a moderate pace this year on the back of continued remittance-supported household spending and further government support for infrastructure development, a World Bank report showed Thursday. In a report titled "Global Economic Prospects 2011," the bank said the Philippines may post a gross domestic product (GDP) growth of only 5 percent this year as the economy moves toward a "slower-but-steady growth." The World Bank's growth forecast was way lower than what the country's economic managers projected. Last Dec. 23, 2010, Socioeconomic Planning Secretary Cayetano Paderanga said the country may reach an economic growth of 7-8 percent in 2011. Eric Le Borgne, World Bank senior economist for the Philippines, said in a press briefing that investor confidence would be sustained by the "government's efforts to step up reforms in the areas of governance and in improving the overall investment climate." Domestic demand The bank said that the global GDP — which expanded by 3.9 percent in 2010 — will contract to 3.3 percent in 2011, before it reaches 3.6 percent in 2012. Developing economies are expected to grow 7 percent in 2010, 6 percent in 2011, and 6.1 percent in 2012. They will continue to outstrip growth in high-income countries, whose economies are seen to accelerate by 2.8 percent in 2010, 2.4 percent in 2011, and 2.7 percent in 2012, the World Bank said. The bank said that East Asia and the Pacific, which posted a GDP growth of 9.3 percent, led the economic growth last year. "This was on the back of an estimated 10-percent increase in Chinese GDP and a 35-percent increase in its imports." The GDP growth for the region is projected to be "slow but strong" at 8 and 7.8 percent in 2011 and 2012, respectively, according to the bank. The report said that domestic demand will be the major driver of growth in the East Asia and the Pacific region. "Due to projected weaker growth among high-income countries, regional export volumes are expected to expand at a 12-percent pace in 2011-2012 versus the 15-percent pace recorded during the boom," a World Bank statement said. Outlook remains strong Le Borgne pointed out that the Philippines — whose exports are dominated by electronics and semiconductors — is indeed exposed to the risks of a slowdown in demand from developed countries. "But the outlook within the industry remains strong," he said. "On the services side, the business process outsourcing industry is booming, and despite concerns that a sharp and pronounced appreciation of the peso would have, the sector's short term growth prospects are favorable," Le Borgne said. He pointed out that food price increases pose risk "but rice supply constraints is not expected in the near term in the Philippines given decent palay production in the latter part of 2010 and large stockpiles at the National Food Authority." On the fiscal side, Le Borgne said he expects some unwinding of the crisis-related fiscal easing to happen in 2011 as part of the government's medium-term fiscal consolidation plan that aims to reduce the overall fiscal deficit to 2 percent of the GDP by 2013. "However, despite this slow unwinding and the country's relatively high debt levels, the government has been able to access markets at historically low spreads, including last week for its $1.5 billion global peso bond," he said. On the monetary policy side, while stronger and faster fiscal consolidation would help in the conduct of monetary policy, a measured unwinding is expected throughout 2011 in line with other emerging markets central banks, the World Bank said. — JE/OMG, GMANews.TV