WB keeps 4.2% GDP growth forecast for Philippines

The Philippine economy may grow at a rate of 4.2 percent in 2012, according to the World Bank.

The World Bank retained its 4.2 percent growth forecast for the Philippines on the assumption that government will ramp up spending and raise revenue, among other factors.

The agency added that a 5 percent growth is possible in 2013.

The Philippine Institute for Development Studies (PIDS) had a more optimistic view, forecasting 2012 GDP growth at 5.6 percent.

“We see strong headwinds and uncertainties ahead. Developing countries like the Philippines should prepare. I want to highlight the necessity of generating higher revenue in the immediate term to be able to meet goals under the Philippine Development Plan,” World Bank country director Motoo Konishi said Thursday at a briefing in Makati City.

Karl Kendrick Chua, country economist (Poverty Reduction and Economic Management Unit) of the World Bank, said that global conditions are changing every day, with China’s production outlook falling and Greek credit rating downgraded to just above junk level, and it is important for governments and researchers to keep abreast of developments.

Slow growth in large middle-income countries and financial turmoil and recession in Europe are generating headwinds for developing countries, Chua said.

“A sharp deterioration in conditions could imply a cycle as large as the 2008/2009 crisis—potentially longer-lasting because of reduced policy space,” Chua said in his presentation. Developing countries’ activities will be vulnerable to varying degrees to a further decline in international capital flows, reduced exports, falling commodity prices or remittance levels, reduced international aid.

The Philippines should thus stimulate investment as well, Chua said.

For the Philippines to cope, the government can stimulate domestic investment and support short-term growth through adequate fiscal policy.

Chua highlighted the urgency of passing excise tax and fiscal incentives rationalization bills.

Meanwhile, PIDS president Josef T. Yap, citing a study completed with another PIDS fellow Adoracion M. Navarro, said public spending would be revived but that downside risks for exports and international fuel prices remained.

Yap said at the same briefing that stimulus from government spending, particularly in infrastructure, would help sustain growth momentum in various sectors.

Agriculture is also expected to recover from the impact of natural disasters in 2011 and grow by 2.5 percent this year.