MANILA, Philippines - The World Bank (WB) has scaled down its growth outlook for the Philippines this year to 4.5 percent, from an earlier forecast of five percent, due to the continued economic woes in the US and Europe.
In its Philippine Quarterly Update released yesterday, the WB likewise projected the economy, as measured by the gross domestic product (GDP), to grow by a slower five percent in 2012, from the previous forecast of 5.4 percent.
“Increased uncertainty about global demand and a further slowdown in domestic investments pose significant downside risks to our GDP growth forecast,” the report noted.
It said the growth drivers this year remain the services and industry sectors, favored by a more upbeat business sentiment and the full roll-out of infrastructure-related projects.
“Capital inflows are expected to continue, but foreign direct investments (FDI) is projected to be moderate as foreign investors have become more cautious in light of the recent financial turmoil,” it added.
Nevertheless, the WB report said the Philippines is enjoying relative political stability and its fiscal position has improved.
It said consumption will be buoyed by falling unemployment, expansion of the conditional cash transfer (CCT) program, as well as sustained remittance inflows, which will boost the current account surplus.
The report added that the country’s trade deficit is likely to expand as imports pick up. However, gains will be partly offset by robust exports of services, particularly from business process outsourcing (BPO).
“To better insulate the Philippine economy from external shocks, it is important to maintain strong macroeconomic fundamentals and improve its competitiveness through diversifying exports, strengthening domestic competition, and improving productivity of the services sector,” WB economist Soonwha Yi said in a press statement.
“With ample fiscal space, the government is expected to boost spending in the second half and catch up on delayed implementation of infrastructure projects.”
The WB report said domestic investment is projected to expand to 21.8 percent of GDP for 2011 (from 20.5 percent in 2010), and to improve further to 23.1 percent in 2012, as the government accelerates the pace of its capital outlays and as business sentiment turns more positive.