Growth Forecasts Remains at 6.4% – World Bank

Written by Marc Adrian

In the April edition of its “East Asia and Pacific Economic Update” report released Wednesday, the Washington-based multilateral lender pegs 2019 and 2020 growth at 6.4% and 6.5%, respectively. The World Bank associated the “downside risks” to the uncertainty of most domestic and external policy.

In a statement, the World Bank said:

“Growth is expected to be driven by higher private consumption growth on the back of subsiding inflation and strong election activities.”

According to the World Bank, Capital formation growth may moderate in the first half of 2019 due to the budget approval delay and the implementation of the pre-election spending ban on new public construction projects but is expected to accelerate in the second half of 2019 as the public infrastructure investments regain momentum. They also cited that exports will remain sluggish due to the weak external environments. However, imports remain to be robust as it is driven by the capital requirements of businesses and for infrastructure projects.

At the start of April, World Bank slashed its growth outlook on the Philippine economy due to softened public spending and concerns about the El Nino dry spell. However, their latest estimate still remains higher than the last year’s actual pace which was at 6.2%.

Another global watcher, Fitch Ratings, also cut down its estimate to 6.2% from 6.6% due to the budget delay and external factors expected to weigh on the growth. Meanwhile, The inter-agency Development Budget Coordination Committee recently trimmed its 2019 gross domestic product growth forecast to 6%-7% from 7-8% originally after the government operated on a reenacted budget for four months.

World Bank also added that the downside risks to the growth has remained elevated and are attributed to the delayed implementation of the public infrastructure investment projects, delayed 2019 budget approval, and policy uncertainty over tax reform programs that could prolong weakened investor confidence. Meanwhile, they noted that the government’s expansionary fiscal strategy could lead to fiscal sustainability challenges if not accompanied by revenue increases. But with strong macroeconomic fundamentals in place, the economy has a buffer against shocks.