World Bank: Phlilippines to rebound ‘very solidly’ this year

MANILA, Philippines — The Philippines still has the potential to rise as an economic powerhouse in the region in a post-COVID world, even as recovery from the pandemic remains fragile, the World Bank said.

In a webinar, World Bank country director Ndiame Diop said the Philippines is likely to rebound “very solidly” this year and gradually recover going forward.

“I believe the Philippines is very well positioned to become a growth powerhouse post-pandemic in this region and has an opportunity to do so in an inclusive and sustainable fashion,” Diop said.

“Countries like the Philippines that have started the pandemic with a very good fiscal position and high credibility in credit markets, and have responded with prudence, flexibility, and some coordination of fiscal and monetary policies are better placed to navigate the recovery,” he said.

Diop emphasized that the country remained steadfast in addressing chronic investment gaps in infrastructure through its Build Build Build program and in improving the policy environment for private sector investment.

Recovery in the short term, however, will depend on vaccine rollout, budget utilization and monetary policy support.

The Washington-based multilateral lender noted that the country’s progress in its COVID-19 vaccination program has been encouraging. To date, some 36 percent of the population has been fully vaccinated.

Diop commended the government and the private sector for securing millions of doses for the population despite an extremely distorted global vaccine market.

As to the 2022 budget, he said focus should be on health resilience, education reopening, cash subsidies, continued infrastructure development, and targeted support to sustain the recovery.

Further, Diop said steering and navigating the recovery will not be easy for the Philippines and many other countries given the scale of shock caused by the pandemic.

Added to this is the more limited fiscal space across economies as well as the high inflation in the US, which could shift monetary policy to a less accommodative stance across the world sooner than previously anticipated.

“In fact, I am less worried about inflation in the Philippines per se than the implication of higher inflation in the US on capital flows and the margin of maneuver of central banks in emerging market economies,” Diop said.

Moreover, the World Bank called on policymakers to steer the economy toward the right trajectory post-pandemic by emphasizing and mainstreaming sustainability and resilience, especially given the existential threat of climate change.

Several economic bills are pending in Congress, such as the amendments to the Foreign Investments Act, Public Service Act and Retail Trade Liberalization Act.

Changes in these laws would ease restrictions on foreign businesses, introduce changes to the definition of public utilities, and allow greater foreign investment in telecommunications and transportation.

“I believe these will prepare the private sector well to invest in new opportunities, leverage the acceleration of digital development, catalyze job creation and improve growing sectors as the economy fully reopens,” Diop said.