WB raises 2013 growth forecast for PH to 7%

The World Bank has raised its growth forecast for the Philippines this year to 7 percent, citing good-governance efforts by the administration, improving domestic business and consumer confidence.

In a report on Monday, the multilateral lender announced that it had revised its forecast for the growth of the Philippine economy to 7 percent this year and 6.7 percent in 2014, higher than the previous projections of 6.2 percent and 6.4 percent, respectively.

The higher forecast comes after the Philippine economy grew by 7.6 percent in the first half of the year, beating most analysts’ expectations. This was above the government’s official 6 to 7-percent target for 2013.

On the other hand, the bank lowered its 2013 growth forecast for East Asian developing countries to 7.1 percent and warned that a prolonged US fiscal crisis could be damaging to the region.

The estimate for this year’s GDP is down from a forecast of 7.8 percent in April, and lower than the 7.5 percent growth recorded in 2012 and 8.3 percent in 2011.

To sustain the country’s growth momentum, the World Bank said the government should further strengthen efforts to increase revenues and continue spending on infrastructure.

“Increased investment levels and fiscal sustainability are possible only with efficient government spending financed by increased revenues through a combination of tax policy and administrative measures, and improvement in the investment management process,” the bank said in a statement.

The Philippines’ problem, the World Bank said, was ensuring that the benefits of economic growth are felt in rural areas that are dependent mainly on the country’s long-neglected agriculture sector.

“The country’s growth is not creating the type of poverty reduction we would like to see. Much of that is due to the structure of the economy,” World Bank lead economist for the Philippines Rogier van den Brink said at a press conference.

The World Bank said infrastructure development, backed by higher revenues, would be key to the development of the agriculture sector and all other industries that can support the economy.

Van den Brink said while tax rates need not be increased, more can still be done to simplify the country’s tax system to make it easier for businesses and households to pay their taxes, and for the government to collect these revenues.

“Now is the time for developing economies to make structural and policy reforms to sustain growth, reduce poverty, and improve the lives of the poor and the vulnerable,” the bank said.

Van den Brink said instead of developing its agriculture first, followed by its manufacturing industry, the Philippine economy has so far relied on its services sector complemented by domestic consumption. With a report from AFP