MANILA, March 17 (PNA) — The World Bank sees the Philippines sustaining its strong economic performance next year through fast reconstruction program and high infrastructure spending despite the devastation brought by super typhoon ‘Yolanda’.
In World Bank’s Philippine Economic Update (PEU) released Monday, it cited that one of the effects of ‘Yolanda’ is lower consumption growth that may affect the country’s gross domestic product (GDP) expansion.
However, intensive reconstruction spending and fast implementation of these projects can pull off GDP growth for 2014 and 2015.
Before the typhoon ‘Yolanda’ hit the central Philippines, World Bank’s projection to Philippine GDP growth was at 6.7 percent this year and at 6.8 percent next year.
The World Bank has now revised its GDP growth projection to 6.6 percent for 2014 and 6.9 percent for 2015.
”In the short-term, a well-designed and rapidly executed reconstruction program can boost economic growth beyond current projections. Over the medium-term, growth prospects can be enhanced by a sustainable ramping up of high impact infrastructure spending,” the World Bank explained.
World Bank Country Director Motoo Konishi noted that the US$ 8 billion reconstruction program launched by the administration will help in reducing negative impact brought by typhoon ‘Yolanda’ as this will enable the country to rebuild better homes, schools, health facilities, utilities, infrastructure, and livelihoods.
The PEU also cited that supporting the country’s economic growth is the possible increase of recovery and reconstruction spending.
According to the World Bank, ”build back better” strategy suggests recovery spending 30 percent higher than the estimated cost of damage.
Estimated cost of damage to public and private physical assets was at P424 billion or 3.7 percent of the total GDP. However, initial recovery and reconstruction cost was only at P361 billion or 3.1 percent of the GDP. This means, the recovery and reconstruction cost covers only 85 percent of the estimated value of damages and still has more room for spending.
Moreover, World Bank Senior Economist for the Philippines and the PEU’s main author Karl Kendrick Chua noted that impact of higher borrowing costs, lower capital inflows, and a decline in asset prices in the Philippines as an effect of down scaling of quantitative easing in the United States will still be manageable.
Chua cited that Philippines can still manage the said effects with the country’s strong current account surplus, high international reserves, flexible exchange rate system, and sustainable deficits and debt levels.
“The country continues to benefit from strong macroeconomic fundamentals, characterized by low and stable inflation, healthy external balances, and improving government finances. These strong fundamentals will continue to shield the economy from the impact of the global economic slowdown and financial market volatilities,” Chua explained.
“The country is benefiting from a pro-poor government. Second, the country stands to benefit from the strong growth prospects of a dynamic East Asia region. Third, past the half way mark, the reform momentum of the Aquino government is accelerating. And finally, there is a growing consensus among a broad spectrum of stakeholders that the current opportunity to enact reforms marks a critical juncture in the country’s history. By undertaking structural reforms now, the economy can move towards a more inclusive growth path and create more and better jobs for the majority of the population,” added World Bank Lead Economist for the Philippines Rogier van den Brink, on the other hand. (PNA)