By Joann Santiago
MANILA, Jan 14 (PNA) — World Bank (WB) continue to see above-trend growth for the Philippines going forward even if it cuts its growth forecast for the country anew.
The Bank now projects a six percent expansion for the domestic economy this year and 6.5 percent for 2015. These are lower than the 6.6 percent and 6.7 percent downwardly revised forecast it issued the second half of 2014.
These are lower than the government’s 6.5-7.5 percent growth target for 2014 and seven to eight percent target next year.
For 2016, the Bank eyes a 6.5 percent expansion for the domestic economy, also lower than the government’s seven to eight percent target.
In a briefing for the release of WB’s Philippine Economic Update (PEU) Wednesday, WB Senior Country Economist Karl Kendrick Chua said last year was “a very special year” for the country despite slower output up to the third quarter.
He said the impact of Typhoon Yolanda on the economy and on government spending along with the result of the Supreme Court (SC) decision against the continued implementation of the Disbursement Acceleration Program (DAP) and the Priority Development Assistance Fund (PDAF) disadvantaged the government’s spending program.
As of the third quarter of 2014, the economy’s output, as measured by gross domestic product (GDP), stood at 5.8 percent while the third quarter level alone stood at 5.3 percent, lower than quarter-ago’s 6.4 percent and year-ago’s seven percent.
Despite the slower growth as of end-September 2014, the domestic economy posted its 11th over five-percent quarterly growth, among the highest in Asia to date.
Chua said higher investments are needed to ensure the sustained growth of the domestic economy.
He explained that private consumption drives 70 percent of the economy and this easily provides about four percent of annual output.
“But the margin is really determined by exports and investments and government. The 30 percent margin, to get from four percent to six or seven percent (growth) is what should be focused on,” he said.
Chua stressed that “the Philippines is still doing very well” but pointed out that this needs further boost from investments.
The WB report said that revised growth forecast for the country was made on expectations that the government would be able to meet its expenditure program this year.
Aside from risk posed by possible failure of the government to meet its expenditure program, WB is also considering delays in the awarding of the projects under the public-private program (PPP), domestic reform lags such as those targeted to raising revenues and pro-poor spending, weaker-than-projected global growth and financial volatilities as a negative for the economy.
It, on the other hand, noted that continued decline in prices of oil in the international market is a plus factor since this “can stimulate manufacturing on the supply side, and consumption on the demand side.”
Meanwhile, Chua said growth in the Philippines is becoming more inclusive, which is the target of the government.
The report cited latest labor force survey showing that more than one million jobs were created from October 2013 to October 2014.
Also, unemployment to date has dropped to a 10-year low of six percent.
”The improvement in poverty incidence in 2013 is supported by higher growth of real income and lower underemployment among poorer households compared to the rest of the population,” WB said.
Thus, Chua said the government’s 2016 poverty target of 18-20 percent is achievable as elasticity of poverty improved from -2.02 from -0.24 in the last decade.
He explained that the latest elasticity rate in the country means that for every one percent increase in GDP per capita, the rate of poverty incidence falls by more than two percent.
”Over the long-term, if we are able to sustain six percent growth at this level of elasticity, we can double per capita income in one decade, raise it five times in two decades, and multiply it by 11 times in three decades,” he said.
Chua cited that achieving the poverty targets is possible because the country have already experience the current level of elasticity from 1985 to 1997.
”This means it is very possible to eradicate poverty and boost shared prosperity within one generation,” he stressed.
On the other hand, Chua disclosed that the government has to date an investment deficit of 6.8 percent of GDP or amounts to about Php 950 billion.
Specifically, 2.5 percent of the deficit is for infrastructure, amounting to about Php 350 billion; and social service 4.3 percent amounting to Php 600 billion.
Chua said these deficit can be funded by higher revenues on further improvement in tax administration, better accountability and transparency as well as fiscal and economic reforms.
“The Philippines is still doing very well despite the recent slowdown. Growing at six percent or more in the next three decades is not out of reach, but only if we work together to implement the much needed reforms to invest more, enhance competition, simplify regulations, and protect property rights,” he added. (PNA)