WB ups growth outlook for RP to 6.2%

MANILA, Philippines - The World Bank has revised upwards its growth outlook for the Philippine economy this year to 6.2 percent, from an earlier forecast of 4.4 percent, citing the strong performance in the first semester spurred mainly by consumer spending, a rebound in exports and investments, and the sustained inflow of dollar remittances.

In a press briefing yesterday, World Bank senior economist Eric Le Borgne said the continued easing of fiscal policies and the accelerated growth of the business process outsourcing (BPO) sector also padded the country’s growth potential for 2010.

For 2011, however, he said they are looking at a slightly lower growth rate of five percent.

“Next year, the stimulus package may have already been fully matured without a need for any extensions, and the real value of remittances from overseas Filipinos would actually be flat with the strengthening peso,” Le Borgne said.

The World Bank’s upgraded outlook matched a similar revision by the Asian Development Bank (ADB) made last month, with both multilateral funding institutions noting that the higher-than-expected 7.9 percent gross domestic product (GDP) expansion in the first half virtually ensures a solid growth performance for the rest of the year.

The government has pegged its official growth target to between five to six percent this year.

The World Bank said it remains highly optimistic of the prospects of strong growth for the Philippines. “In fact, we are prepared to double our assistance to the Philippines next year,” its country director for the Philippines Bert Hofman said.

The World Bank has a three-year lending program that ranges from $700 million to $1 billion a year.

“We support the Philippines efforts based on their Millennium Development Goals (MDGs),” Hofman added.

He said the World Bank was also prepared to offer guarantees for private financial institutions that are prepared to tap the infrastructure fund.

Capital inflows have also been pouring into the Philippine economy, finding their way into the equities market and the fixed income market.

The World Bank also raised its growth forecast for East Asia’s developing countries but said governments need to control rising risks from surging capital inflows and currency strains.

Output has rebounded to above pre-crisis levels and regional growth should hit 8.9 percent this year, up from a previous forecast of 8.7 percent, the bank said. Last year’s expansion was 7.3 percent.

“The economic recovery in East Asia and the Pacific is robust, but attention must now turn to managing emerging risks which may pose challenges to macroeconomic stability,” the bank said in a twice-a-year outlook for the region’s economies, excluding Japan.

Asia’s rebound has attracted an influx of capital that is pushing up the value of some currencies, which might hurt exports. Some governments have intervened in foreign exchange markets to slow the rise of their currencies, raising fears of a potential “currency war” that might disrupt trade and growth. – with AP