MANILA, Philippines - With more positive data favoring faster economic recovery, the World Bank is sticking to its 3.5 percent growth forecast for the Philippine economy this year despite the adverse impact of El Niño and government’s massive stimulus spending last year.
In its latest issue of the Philippines Quarterly Update, the World Bank said the projected growth – revised from an earlier 3.1 percent forecast – was due to the strong remittance figure, the recovery in private consumption and robust public spending.
World Bank senior economist Eric Le Borgne said rising precautionary savings that dampened spending in 2009 will likely diminish as consumer expectations gradually improve over the next 12 months.
“Growth in private consumption is projected to hold up well in 2010,” Le Borgne added.
Other important growth drivers for 2010 include a replenishment of depleted stocks by private companies and the strong short-term outlook for the business process outsourcing (BPO) sector.
Also, after posting a strong 17 percent growth in deployment of overseas Filipino workers in 2008, deployment growth slowed down but remained robust at 11.7 percent through November 2009. This reflects global staffing restructuring induced by the global recession as well as the strong “value-proposition” of Filipino workers in the global labor market, a trend that will strengthen remittances this year, Le Borgne said.
The World Bank report said the pressure to drastically reduce costs has led some companies to accelerate their staff sourcing from countries such as the Philippines which has a large pool of comparatively cheap, English-speaking, and well-qualified seafarers.
“As a result, seafarers’ deployment increased by about 20 percent in the year through November 2009 despite the decline in cargo shipping,” it added.
Another growth factor is the resiliency of the services sector and the gradual recovery in industries after three quarters of negative year-on-year growth, a trend that should strengthen the Philippine economy’s performance this year.
But the World Bank report also stressed that generating inclusive growth that will uplift the living standards of the poor remains a fundamental challenge as poverty incidence is estimated to remain high following a series of shocks that hit the country.
Le Borgne expressed concern over the adverse affects of the El Niño dry weather phenomenon and its impact on food production.
“A worse-than-expected El Niño could pose serious risks to the country’s growth prospects and trigger larger increases in hunger incidence,” the economist said.
The massive fiscal stimulus implemented by the government in 2009 helped buffer overall economic activity but it also pushed the National Government’s primary fiscal balance into its first deficit since 2002, the estimated public sector balance into its first deficit since 2005, and led to its first increase in the non-financial public sector debt-to-GDP ratio since 2003, the World Bank report said.