WB projects higher growth of 4.6% for Phl

Manila, Philippines - The World Bank has revised its growth projection for the Philippines from 4.2 percent for the whole of 2012 to 4.6 percent, reflecting the economy’s strong performance in the first quarter.

The Philippines’ Gross Domestic Product (GDP) expanded by 6.4 percent in first quarter of 2012, from 4.9 percent in the same period last year.

In its Philippines Quarterly Update (PQU) report, the World Bank said that higher government spending would drive the stronger growth rate.

 “Remittances are also expected to continue to grow, albeit at a slower rate. Services will remain stable, supported by additional employment from the business process outsourcing industry,” it explained.

But the WB report stresses that reforms and spending in infrastructure, education and health would make the Philippines even more attractive to domestic and foreign investors.

In a separate statement, World Bank country director Motoo Konishi said that given the worsening global scenario, investments by the private sector and government spending on key infrastructure as well as education and health would need to rise substantially to cushion the impact of the global crisis, sustain growth as well as create more and better jobs in the Philippines.

The WB PQU, however, warned that the Philippines’ economic momentum is facing strong headwinds from the global economy which is projected to slow down to 2.5 percent this year from 2.7 percent in 2011.

Major export markets are forecast to remain anemic, with the Eurozone projected to suffer a -0.3 percent decline in real GDP this year. China is also expected to grow slower.

“This global slump may intensify, affecting some sectors in the Philippine manufacturing industry such as electronics, causing job losses,” Soonhwa Yi, the main author of the report and World Bank economist, added.

What favors the Philippines, given the global uncertainties, the WB report continue, are its strong macroeconomic fundamentals: low inflation, a flexible exchange rate, a current account surplus, manageable government finances, high international reserves equivalent to almost a year’s worth of imports, and steady remittances.

The Philippines, the WB report said, has a positive current account balance and a flexible foreign exchange policy, a first line of defense against a global downturn.

However, the WB report noted that higher public investment in infrastructure and social services require higher revenue collection. “By broadening the tax base and improving efficiency and transparency in tax collections, this can be achieved,” the report added.

It further stated that improved resource mobilization would not only help brace the economy against a prolonged global economic slump, but also enable the government to make the necessary investments in the physical and human capital needed to underpin a more inclusive growth pattern and make the country more competitive.

In this regard, the investment climate for firms of all sizes needs to continue to improve, so that the private sector can generate more and better jobs for all the WB report said.