World Bank remains bullish on PH

The World Bank sees the Philippine economy growing relatively faster than most of the other emerging markets in the Association of Southeast Asian Nations (Asean) this year mainly on the back of increased spending amid the election season.

In its January 2016 Global Economic Prospects report released yesterday, the multilateral lender nonetheless noted the need for the Philippines to further widen its tax base while also raising foreign direct investment (FDI) inflows as the country remained a laggard in attracting external investors.

“The Philippines and Vietnam are among the countries with the strongest growth prospects” this year, the World Bank said.

The lender kept its earlier projection that the Philippines’ gross domestic product (GDP) would grow by 6.4 percent this year, “reflecting accelerated implementation of public-private partnership (PPP) projects and spending related to the May 2016 presidential election.”

The World Bank’s forecast was nonetheless lower than the Philippine government’s target of 7-8 percent. The lender also expects the country’s GDP growth last year to settle at 5.8 percent, below the government’s “realistic” projection of at least a 6-percent expansion for 2015.

Among East Asia and Pacific countries, only Cambodia, China, Laos, Myanmar, Papua New Guinea, Timor-Leste and Vietnam are seen posting higher growth rates than the Philippines in 2016.

For next year and 2018, the World Bank projected the Philippine economy to further expand, although at a slower rate of 6.2 percent in both years.

The World Bank said that among large developing Asean economies, “growth in the Philippines and Vietnam will benefit from rising household incomes caused by low commodity prices, a diversified and competitive export base (in Vietnam) and investment driven by robust FDI flows.”

But as far as attracting FDI is concerned, the World Bank noted that the Philippines was an exception to the trend of bigger East Asia and Pacific countries attracting higher inflows.

“In the Philippines, FDI has lagged, partly owing to regulatory restrictions,” the World Bank said, while in contrast, inflows to Thailand rose to above pre-crisis levels and in Vietnam, FDI “remained buoyant and were mostly directed at labor-intensive manufacturing.”

The World Bank also urged a number of Asian countries, including the Philippines, to broaden their respective tax bases as well as strengthen public revenue regulation.

Across the region, “strengthened fiscal frameworks could provide a buffer if risks materialize,” the World Bank noted.

“Fiscal policy measures should be framed within a medium-term outlook to strengthen revenue, increase investment and bolster fiscal institutions,” it said.