The World Bank on Friday said it kept its 6.7-percent growth forecast for the Philippines this year and in 2019, as sustained private consumption and higher government spending are seen to offset the uncertainties coming from the external front.
“Considering recent economic data, the composition of expected growth was revised as compared to the April edition of the World Bank Philippines Economic Update,” the multilateral lender said in a statement.
“Given recent fiscal trends, government consumption growth was revised upwards, while private consumption growth is expected to expand at 5.9 percent in 2018 and 6.2 percent in 2019,” it said.
It said investment growth was slightly upgraded due to higher public capital outlays, including increased infrastructure spending.
“Overall, it is anticipated that real GDP growth will increase towards the end of 2018 and into the first half of 2019 with higher election-related public spending,” the bank said.
Birgit Hansl, World Bank lead economist for the Philippines, said the government’s ability to carry out its investment spending agenda would determine if the Philippines could achieve its growth target of 6.5 percent to 7.5 percent over the medium term.
“In addition, higher private investment levels will be critical to sustain the economy’s growth momentum as capacity constraints become more binding,” Hansl said.
Exports, a key driver of growth for the Philippines economy, are projected to moderate in the coming years as global growth is expected to decelerate.
The World Bank’s June 2018 Global Economic Prospects projected a gradual global slowdown over the next two years, predicated on moderately higher commodity prices, strong but gradually moderating global demand, and incremental tightening of global financing conditions.
It said uncertainty around global growth conditions had risen, with the possibility of trade and other policy shocks emerging from major economies.
The Philippine economy grew by a higher-than-expected 6.8 percent in the first quarter this year, driven mainly by the government’s higher fiscal spending and robust private consumption. The first-quarter GDP was higher than 6.5 percent a year ago and 6.6 percent a quarter ago.
The government expects the economy to grow between 7 percent and 8 percent this year, on the back of higher fiscal spending, robust domestic demand and investments.
The inflation rate, however, has accelerated, climbing to a five-year high of 5.2 percent in June from 4.6 percent in May, prompting the Bangko Sentral ng Pilipinas to review its monetary policy.
The June figure was the highest inflation rate in more than five years since the Philippine Statistics Authority used the 2012 consumer price index. It was also faster than 2.5 percent registered in the same month last year.