The Philippines is expected to sustain robust economic growth in the near term although the economy remains at risk of overheating, the World Bank said.
The gross domestic product is projected to grow by 6.7 percent in 2018 and 2019, before slightly slowing to 6.6 percent in 2020, the Washington-based multilateral lender said in its June 2018 Global Economic Prospects report titled “The Turning of the Tide?”
The GDP growth forecasts for the next three years were nonetheless below the government’s 7-8 percent yearly target starting this year until 2022.
The economy grew 6.7 percent in 2017.
The World Bank said economic growth in the Philippines as well as in Vietnam “remains robust.”
However, “capacity constraints (such as high capacity utilization rates) limit further acceleration, especially in the Philippines,” the World Bank said.
In April, the World Bank said the Philippine economy was at risk of overheating, but it could be remedied by attracting more productive investments in manufacturing as well as skills development.
It said there were several domestic risks facing the Philippines, including increasing inflation and an overheating of the economy as well as high fiscal deficits.
“External risks consist of greater policy uncertainty related to growing trade protectionism and increasingly inward-looking sentiments in several advanced and emerging economies, and potential market volatility from faster-than-expected US Federal Reserve rate normalization,” Birgit Hansl, World Bank lead economist and program leader for equitable growth, finance and institutions for Brunei, Malaysia, Philippines and Thailand, said.
In its April 2018 Philippines Economic Update: Investing in the Future report, the World Bank noted that “the economy is currently growing at its potential rate, and the average capacity utilization in the manufacturing industry remains high, with all major industries operating at near full capacity.”
“Moreover, unemployment reached record lows in recent years, signaling less spare labor capacity, although underemployment remains high,” the World Bank had said.
“In an environment of increasing fiscal spending and continued high credit growth, the risk of the economy overheating is increasing,” it said.
As such, “investment in both capital assets and human capital is urgently needed to increase the economy’s productive capacity,” according to the World Bank.