The World Bank expects the Philippine economy to grow by more than 6 percent annually over the next three years, as it remains one of the fastest-growing markets in Southeast Asia.
It said the gross domestic product growth of the Philippines would pick up to 6.1 percent in 2020 from 5.8 percent in 2019. Growth would be faster at 6.2 percent in 2021 and 2022.
The World Bank, in its January 2020 Global Economic Prospects, revised downward its growth projections for the Philippines from 6.4 percent in 2019, 6.5 percent in 2020 and 6.5 percent in 2021 amid external headwinds.
Its 2020 forecast for the Philippines, however, is still faster than Thailand’s 2.7 percent, Malaysia’s 4.5 percent and Indonesia’s 5.1 percent. Only Vietnam is seen to grow faster this year at 6.5 percent.
“Global economic growth is forecast to edge up to 2.5 percent in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist,” the Washington-based multilateral lender said.
Growth in the Asia-Pacific region is projected to ease to 5.7 percent in 2020, reflecting a further moderate slowdown in China to 5.9 percent this year amid continued domestic and external headwinds, including the lingering impact of trade tensions.
“This outlook is predicated on no renewed escalation of trade tensions between China and the United States and a gradual stabilization in global trade. It also assumes that authorities in China continue to implement monetary and fiscal policies to offset the negative impact of weakening exports,” it said.
Meanwhile, global debt watcher Moody’s Investors Service predicted that the Philippine economy would grow by 6.2 percent this year with the timely signing of the P4.1-trillion national budget.
Moody’s said in a report that the signing into law of the 2020 budget by President Rodrigo Duterte amounting to P4.1 trillion, equivalent to 20.2 percent of GDP, was “credit positive.”
“We expect the pace of government spending to normalize and, along with residual spending from the 2019 budget, support a significantly larger fiscal expansion in 2020,” Moody’s said.
“We project the Philippines’ real GDP growth will accelerate to 6.2 percent this year from 5.8 percent in 2019, faster than most regional and rating peers and bucking the trend of lackluster global economic growth,” it said.
Moody’s said part of the support to growth would come from budget implementation over the course of a full year. An impasse between the two houses of Congress led to a delay in passing the 2019 General Appropriations Act.
The economy grew by 6.2 percent in the third quarter and 5.8 percent in the first three quarters of 2019, near the low end of the target range.
Economic managers earlier said the GDP should grow by at least 6.7 percent in the fourth quarter to reach the low end of the 6 percent to 6.5 percent target range.
The delay in the approval of the 2019 budget compelled the government to operate under a reenacted 2018 budget, which excluded appropriations for new or recently approved infrastructure projects, prohibited the construction of public works and the disbursement of public funds in the 45-day period before the midterm elections held last May.
Moody’s said despite its expectation of a significant pickup in budgeted spending and a consequently wider fiscal deficit, it expects underlying strengthening in Philippine fiscal metrics because of ongoing structural increases in revenue from tax reform.
“In 2020, revenue will be enhanced by scheduled increases in excise taxes effective at the beginning of this year, some of which were part of the Duterte administration’s first package of tax reforms passed in 2017. In addition, a 2018 law raised duties on tobacco products. We expect national government debt to remain stable and debt affordability to improve,” Moody’s said.
Moody’s currently rates the Philippines “Baa2” or investment grade with a stable outlook.