The World Bank on Tuesday kept its 2023 growth forecast for the Philippines at 5.6 percent, saying the economy remained resilient despite local and global headwinds marked by elevated inflation, higher interest rates, world growth slowdown and geopolitical tensions.
The bank in October cut its previous forecast to 5.6 percent from 6 percent in June 2023.
World Bank Philippines senior economist Ralph van Doorn said in a briefing the gross domestic product growth would rebound stronger in the next two years.
“The Philippine economy showed resilience despite a global slowdown and grew by 5.5 percent in the first three quarters of 2023, faster than peer countries in the region. Growth is projected to increase to an average of 5.8 percent in 2024-2025, supported by robust private consumption and rising investments,” Doorn said.
The bank’s 5.6 percent growth forecast is below the government’s target range of 6 percent to 7 percent for the year. Economic managers remained optimistic that the low end of the target range remained doable on more economic activities during the holiday season.
Doorn said external risks to growth include the escalation of geopolitical tensions that could lead to additional food and energy supply shocks, placing additional pressure on inflation.
“Trade restrictions on agricultural products could cause supply disruptions and lead to increased volatility in commodity prices,” he said.
Doorn said that in major advanced economies, the still elevated core inflation could prompt central banks to keep interest rates higher longer than expected.
He also said the global environment was less favorable that would affect exports in the Philippines. He said higher inflation could tighten financial conditions and higher cost of borrowing.
Doorn said the threat of El Nino and other climate disturbances might yet again raise food supply challenges.
He said containing high inflation through both monetary and non-monetary measures and providing assistance to vulnerable sectors remained the country’s main domestic policy challenges.