World Bank hikes RP growth forecast to 1.4%

MANILA, Philippines - The World Bank has upgraded its growth forecast for the Philippines this year, reversing an earlier estimate of a 0.3-percent contraction to an expansion of 1.4 percent, as it noted that an expected global economic recovery would further lift the inflow of remittances, boost exports and encourage consumer spending.

In its latest East Asia and Pacific update, the World Bank said the anticipated growth falls within the range of the Philippine government’s official forecast of a gross domestic product (GDP) growth of between 0.8 percent to 1.8 percent in 2009.

“Remittances are staying strong. Government consumption and public construction will continue to benefit from the National Government’s spending in the remaining months of 2009. So, based on new data, we believe the government growth forecast for 2009 to be entirely feasible,” World Bank country director Bert Hofman said yesterday.

Money sent home by overseas Filipino workers are expected to rise by four percent to a record $17.1 billion this year, the Bangko Sentral ng Pilipinas (BSP) said.

The World Bank initially projected GDP growth in the Philippines this year at 1.9 percent, scaling it down to –0.3 percent as the economy was teetering into a recession. But a stronger than expected output in the second quarter – boosted by government spending on infrastructure and social services – sparked renewed growth expectations.

The World Bank is the second multilateral agency to revise its growth projections for the Philippines. Last month, the International Monetary Fund said the country will grow by one percent, also reversing an earlier estimate of a one percent contraction.

Hofman pointed out that had it not been for the damages brought by the recent typhoons, the World Bank would have reverted back its 2009 growth forecast to the original 1.9 percent.

World Bank senior economist for the Philippines Eric Le Borgne said despite the positive outlook, the challenges remain daunting for the Philippines, especially on the fiscal side.

“The Philippine economy is still far from reaching its potential,” Le Borgne said, adding that the Philippines must address the long-standing bottlenecks that depress growth and poverty alleviation.

He said the business climate remains one of the major stumbling blocks as both domestic and foreign investors continue to rank the Philippines as among the nations with the worst business climate.