MANILA, Philippines - The World Bank expects the Philippines to rebound from a modest 1.4-percent growth in 2009 to a considerable 3.5-percent expansion this year, the multilateral financial institution said in its latest report.
Earlier, the World Bank upgraded its growth forecast for the Philippines last year, reversing its previous estimate of a 0.3-percent contraction, as it noted that an expected global economic recovery would further lift the inflow of remittances, boost exports and encourage consumer spending.
In a press briefing, World Bank senior economist Eric Le Borgne said the low inflation environment, increased spending due to the May national elections, and the strong remittance inflows from overseas Filipinos would fuel the growth in economic activity.
However, he said growth could be threatened by the permanent erosion of tax revenues, improper timing in the exit of the government stimulus package, and a prolonged global economic recovery.
Le Borgne said a major concern is that the Philippines will remain in a standstill for a prolonged period after 2010.
“Slow or poor unwinding of the government fiscal stimulus packages may leave the country vulnerable to external threats, and it fails to unlock the growth potentials,” Le Borgne said.
Unwinding stimulus packages should be done hand-in-hand with expanding private sector involvement, he pointed out.
He said government must also identify and develop growth areas such as business process outsourcing (BPO), services, power and infrastructure sectors, to support growth.
Meanwhile, remittances from overseas Filipinos are expected to fuel private consumption as it has been expanding faster than earlier forecasts.
Le Borgne, however, warned about developments in the Middle East and the African states that could derail remittance growth rates. “The risks could come from the construction sector in Dubai or the Gulf states,” he said.
Nonetheless, he said he expects remittances this year to expand much faster than 2009.
According to the Bangko Sentral ng Pilipinas (BSP), remittances coursed through the country’s banking system reached $15.8 billion from January to November 2009. In November alone, it hit a record $1.5 billion. It is expected to surpass the $17-billion level in 2009 as December remittances are normally among the highest due to the Yuletide season, thus registering a record high in remittances in peso terms.
Meanwhile, the World Bank is forecasting an economic growth rate of 6.8 percent for East Asia and Pacific region in 2009, with China and Indonesia among the key players. The region is further expected to post growth of 8.1 percent this year.
China’s economy is forecast to grow nine percent this year from an estimated 8.4 percent in 2009 and a high of 13 percent in 2007. Indonesia is seen to expand by 5.6 percent in 2010 and 5.8 percent in 2011, from an estimated 4.5 percent in 2009.
After an estimated 2.2 percent decline in 2009, global gross domestic product (GDP) is seen to expand by 2.7 percent in 2010 and another 3.2 percent next year.
“Prospects for developing countries are for a relatively robust recovery, growing 5.2 percent this year and 5.8 percent in 2011 – up from 1.2 percent in 2009. GDP in rich countries, which declined by 3.3 percent in 2009, is expected to increase much less quickly – by 1.8 and 2.3 percent in 2010 and 2011,” the World Bank said.
World trade volumes are projected to expand by 4.3 and 6.2 percent this year and in 2011, coming from a 14.4 percent contraction in 2009.
World Bank chief economist and senior vice president Justin Lin revealed that the poorest countries, or those that rely on grants or subsidized lending, may require an additional $35-50 billion in funding just to sustain pre-crisis social programs.
In this still weak environment, oil prices are expected to remain broadly stable, averaging about $76 a barrel; and other commodity prices should rise by a mere three percent per year on average during 2010 and 2011, he added.
The report warns that, despite the return to positive growth, it will take several years before economies recoup the losses already endured. It estimated that about 64 million more people will be living in extreme poverty (on less than $1.25 a day) in 2010 than would have been the case had the crisis not occurred.
It added that increased risk aversion, a more prudent regulatory stance, and the need to curb some of the riskier lending practices during the boom period that preceded the crisis, could result in scarcer, more expensive capital for developing countries in the next five to 10 years.