World Bank upgrades Philippine growth forecasts

MANILA, Philippines - The World Bank now expects the Philippine economy to grow 6.8 percent this year—faster than the 6.4 percent forecast it made in October—largely due to high investor and consumer confidence.

Growth projection for 2017 was also raised to 6.9 percent compared to the October forecast of 6.2 percent. In 2018, the domestic economy is expected to expand seven percent.

The US-led multilateral development institution said the higher-than-expected growth of 7.1 percent in the third quarter, backed by increased investments and strong consumption, continued the robust growth in the first half which was driven by election-related spending.

“Recent economic trends illustrate the high confidence among investors and consumers, and provide the foundation for a more optimistic outlook for the remainder of 2016 and 2017,” said Birgit Hansl, World Bank lead economist for the Philippines, in a statement. 

“The economy’s strong performance in October and November, and continued policy commitment to an increase in public infrastructure spending are expected to carry the economy’s growth momentum over to 2017-2018.”

World Bank said growth in capital investment is expected to remain as the country’s primary engine of growth. Despite a likely increase in interest rates in 2017, the country’s monetary policy is seen to remain “supportive of growth,” resulting in the expansion in credit provision.

It said the government’s commitment to implement large infrastructure projects would to have “significant spillover effects” into consumption growth in 2017.

“Accompanied by robust credit growth to households and healthy remittances, this is expected to fuel consumption”, the World Bank said.

The National Economic and Development Authority (NEDA), meanwhile, forecast the domestic economy to expand between 6.5 to seven percent this year. Fourth quarter growth is expected to be at around seven percent.

In 2017, NEDA expects growth of 6.5 to 7.5 percent and seven to eight percent beyond 2017.

In a briefing yesterday, Socioeconomic Planning Secretary and NEDA chief Ernesto Pernia cited as drivers the continued strength in household consumption as well as investments in construction, public infrastructure and durable equipment.

This is seen to be supported by low inflation, low interest rates, improved labor market conditions and steady growth in remittances of overseas Filipino workers.

Government assistance such as the Pantawid Pamilyang Pilipino Program is also seen to provide additional boost to consumer demand.