World Bank lowers PHL economic growth forecast

The Philippines will likely post modest economic growth this year and next, according to the World Bank East Asia and Pacific Economic Update. The Washington-based lender said in its semi-annual report that Philippine output will grow by 4.2 percent this year and 4.8 percent in 2012 — lower compared to what it expects of Indonesia and Malaysia, two of three other mid-income countries in Southeast Asia. The Philippines is benefiting from relative political stability and an improved fiscal position, but key downside risks to growth — increased global uncertainties and a slowdown in investments — remain, the bank said. “Prospects are weaker for Philippine growth: we have revised our growth forecast downward from 5.0 to 4.2 percent for 2011 and from 5.4 to 4.8 percent for 2012. Indonesia will post 6.4 percent this year and 6.3 percent next year, while Malaysian output will expand by 4.3 percent and 4.9 percent, respectively, according to the bank. Thailand — the other mid-income country — is expected grow 2.4 percent this year and 4 percent in 2012, the report said. Despite modest growth prospects for the Philippines, the bank said it is more prepared to withstand the global turmoil caused by the Euro debt crisis and a sluggish US economy. "The Philippines is well-positioned to absorb any new financial shock that might evolve from the current turmoil. The country is well insulated from the global financial crisis owing to a significant improvement of macroeconomic fundamentals and to some extent regulatory reforms already in place following the Asian Financial Crisis of 1997-98," the bank said. Other positive factors for the Philippines are the strong remittance from overseas Filipino workers and the conservative stance of the financial and corporate sectors, the bank noted Still, the World Bank is urging the Philippine government to improve competitiveness for a more resilient economy. "To strengthen the country's resiliency to external shocks, the government needs to accelerate public spending. Raising more revenues through improved tax administration and policy reforms will enable the government to meet its priority spending targets, especially in infrastructure and human capital investment," the bank said. — VS, GMA News