Philippine economy
This Dec. 18, 2018 photo shows traffic at Welcome Rotonda in Manila.
The STAR/Miguel Antonio de Guzman
World Bank retains 6.4% Philippine growth forecast for 2019
( - April 24, 2019 - 4:51pm

MANILA, Philippines — The World Bank on Wednesday retained its growth forecasts for the Philippines, saying that “downside risks” remain as both domestic and external policy uncertainty stay elevated.

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.

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

“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,” it added.

“Exports will remain sluggish given a weak external environment, while imports remain robust driven by capital requirements of businesses and for the infrastructure projects.”

Citing softer public spending and concerns about the El Niño dry spell, the World Bank last April 1 slashed its growth outlook on the Philippine economy, although the latest estimate for 2019 is still faster than last year’s actual 6.2% pace.

Also on Wednesday, global debt watcher Fitch Ratings revised down its GDP growth estimate for the Philippines to 6.2% in 2019 from 6.6% previously, saying recent budget delay and external factors are expected to weigh on growth.

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.

“Downside risks to growth remain elevated. Key external risks come from heightened uncertainty generated by the US-China trade dispute, the ongoing policy normalization in advanced economies, and tighter global financing conditions,” the World Bank said.

“Key domestic risks come from the delayed implementation of the public infrastructure investment projects, partly caused by delayed 2019 budget approval, and policy uncertainty over tax reform programs that could prolong weakened investor confidence,” it added.

“In the medium term, the government’s expansionary fiscal strategy could lead to fiscal sustainability challenges if not accompanied by revenue increases. Still, strong macroeconomic fundamentals are in place to buffer against shocks.” — Ian Nicolas Cigaral

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