World Bank upgrades growth outlook on Philippines, but inflation still a threat
MANILA, Philippines — The World Bank said the Philippine economy would likely grow faster than initially projected this year on the back of strong consumer demand, although high inflation remains a big threat.
In its Philippines Economic Report released Wednesday, the Washington-based multilateral lender said the economy would likely grow 6.0% this year, higher than its old projection of 5.6% growth back in April.
If realized, the Bank’s new forecast for the Philippines would match the low end of the Marcos Jr. administration’s target for this year, which pegged economic growth to clock in at 6-7%.
“Strong domestic demand is underpinned by consumer spending drawing strength from the continuing jobs recovery and the steady flow of remittances,” World Bank said.
“Fixed capital investment will also contribute to growth, anchored on upbeat domestic activity, and improved business confidence,” it added.
The Philippines’ gross domestic product grew 6.4% year-on-year in the first three months of the year, slower compared to the annual growth rate of 7.1% recorded in the fourth quarter of 2022, and the 8.0% expansion recorded a year ago.
But quarter-on-quarter, the economy grew 1.1%. The latest year-on-year outturn was also better than market expectations, as consumption, a major growth driver, showed resilience in the face of high inflation.
With the domestic economy absorbing the central bank’s rate hikes, government data showed inflation further eased to 6.1% in May, inching closer to the Marcos administration's 2-4% target.
But World Bank said high inflation remains a risk to the economic outlook due to several factors including natural disasters affecting food supply, the threat of El Niño that could further constrain food production, logistics and supply chain challenges, and pressure from domestic demand.
“High inflation erodes the purchasing power of poor families, making it more difficult for them to afford necessities,” the Bank said.
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