The World Bank said Thursday it had reduced its 2011 growth projection for the Philippines to 4.5 percent from the previous 5 percent, although “strong macroeconomic fundamentals are cushioning the impact of the global economic turmoil.”
Likewise, the country’s growth forecast for 2012 had been reduced to 5 percent from 5.4 percent.
According to the institution’s Philippine Quarterly Update, which it released Thursday, the slowdown in the United States and Europe would continue to affect Philippine exports, but the domestic economy at large is expected to hold out.
The WB noted that the Philippines’ external position and macroeconomic fundamentals remain strong.
In particular, greater inflows of remittances and net services receipts helped boost the current account surplus by 20 percent year on year in the second quarter.
Also, the update pointed out that net foreign portfolio inflows in the eight months to August reached $1.3 billion, or more than triple the year-ago amount, owing to relatively higher growth prospects and yields.
“To better insulate the Philippine economy from external shocks, it is important to maintain strong macroeconomic fundamentals and improve its competitiveness through diversifying exports, strengthening domestic competition, and improving productivity of the services sector,” said Soonwha Yi, who led the team that prepared the report.
Yi said in a statement that private consumption is expected to grow steadily, buoyed by lower unemployment, higher government spending and sustained remittances.
The economist added that with ample fiscal space generated by reforms in the budgeting process, the government is expected to boost spending in the second half and catch up on delayed implementation of infrastructure projects.
“On the supply side, growth for [2011] is expected to come from the services and industry sectors, favored by a more upbeat business sentiment and with the full roll-out of infrastructure-related projects,” Yi said.