World Bank prods gov’t on infra spending hike
The government’s plan to ramp up infrastructure spending will support sustained robust economic growth in the near term, according to the World Bank.
Separately, debt watcher S&P Global Ratings, in a report released Wednesday, slightly raised its gross domestic product (GDP) growth projection for 2016 and 2017 to 6.6 percent and 6.4 percent, respectively, from 6.5 percent and 6.3 percent previously.
The government will announce the 2016 GDP growth figure on Jan. 26. The Duterte administration targets a 6-to 7-percent GDP expansion last year and further growth of 6.5-7.5 percent this year.
S&P also projected the Philippine economy to grow by 6.2 percent in 2018 and 6.3 percent in 2019, below the government’s annual growth target range of 7-8 percent from 2018 to 2022.
S&P kept the country’s “BBB” investment-grade credit rating with a “stable” outlook that “balances the Philippines’ lower middle-income economy and diminished policy stability, predictability and accountability against its strong external position, which features rising foreign exchange reserves and low and declining external debt.”
As it announced in September last year, a higher rating for the Philippines was “unlikely over our two-year ratings horizon,” S&P said.
“We may raise the ratings if continued fiscal improvements under the new administration boost investment and economic growth prospects, or if improvements in the policy environment lead us to a better assessment of institutional and governance effectiveness. We may lower the ratings if, under the new administration, the reform agenda stalls or if there is a reversal of the recent gains in the Philippines’ fiscal or external positions,” S&P said.
In a report titled “Global Economic Prospects: Weak Investment in Uncertain Times,” the World Bank said that among large commodity importers, the Philippines as well as Vietnam “continues to have the strongest growth prospects, although capacity constraints will likely limit acceleration in the medium term and could cause overheating pressures.”
“In the Philippines, growth is projected to accelerate to 6.8 percent on average in 2017-19, supported by ongoing infrastructure projects, strong consumption, buoyant inflows of remittances and strong revenue from services exports,” the report read.
In December, the World Bank jacked up its growth forecasts for the Philippines for the period 2016-2017, citing sustained high consumer as well as investor confidence in the near term.
The Washington-based multilateral lender upgraded its Philippine growth projection for 2016 to 6.8 percent from the 6.4-percent forecast last October.
For 2017, the economic growth forecast was also raised to 6.9 percent from 6.2 percent previously.
The World Bank expects the Philippines economy to grow 7 percent in 2018 and 6.7 percent in 2019, the report showed.
Moving forward, the World Bank said the Philippines needed to address its infrastructure gap and remove trade barriers to bolster investment.
“Barriers to services trade remain elevated for Indonesia, Malaysia, the Philippines [and] Thailand,” the World Bank noted.
In the case of infrastructure, the World Bank said the Philippines was particularly weak with regard to transport and trade-related infrastructure.
“It continues to rank above 100 globally in the overall state of its infrastructure (based on a World Economic Forum report in 2015), with particularly low rankings for the quality of its seaports and airports. About one quarter of the population remains without electricity,” the World Bank said.
The World Bank nonetheless noted that in recent years, the Philippines alongside Malaysia and Thailand saw substantial demand for upgrading and maintenance of infrastructure.
The World Bank also enjoined the Philippines and Thailand to adopt an expansionary fiscal stance in the short term, alongside policies aimed at a sustainable medium-term fiscal framework.
Also, “improved regulatory oversight and supervision is needed for the nonbank financial sector” of the two countries as well as Cambodia and Malaysia, the World Bank pointed out.