Despite external shocks, the World Bank on Friday said it kept its growth forecasts for the Philippines of 6.7 percent for both this year and next year on the back of robust government spending, especially on infrastructure.
In a statement, the Washington-based multilateral lender said it maintained its gross domestic product (GDP) growth projections for the Philippines for the years 2018 and 2019 “despite rising global uncertainty.”
The World Bank’s forecasts were nonetheless below the government’s target range of 7-8 percent growth yearly starting this year until 2022.
The Philippine economy grew 6.7 percent last year, among the fastest across emerging Asian economies.
Revised upwards
While keeping the GDP growth projections, the World Bank said that “considering recent economic data, the composition of expected growth was revised” when compared to estimates made last April.
“Given recent fiscal trends, government consumption growth was revised upwards, while private consumption growth is expected to expand at 5.9 percent in 2018 and 6.2 percent in 2019. Investment growth was slightly upgraded due to higher public capital outlays, including increased infrastructure spending,” the World Bank said.
The World Bank’s Philippines Economic Update report in April projected a slightly lower 5.8-percent growth in private consumption this year.
The World Bank did not say what the updated government consumption and gross fixed capital investment growth forecasts were, but the projections last April were 8.9 percent and 11.8 percent, respectively.
Expenditures
The latest Bureau of the Treasury data showed that the national government’s expenditures on public goods and services from January to May jumped 25 percent to P1.33 trillion from P1.06 trillion in the same five-month period last year.
In the first five months, government spending on infrastructure and other capital outlays climbed 42.4 percent to P280.8 billion from P197.2 billion a year ago.
“Overall, it is anticipated that real GDP growth will increase towards the end of 2018 and into the first half of 2019 with higher election-related public spending,” the World Bank said, referring to next year’s midterm elections.
Determinant
“The government’s ability to carry out its investment spending agenda will determine if the Philippines can achieve its growth target of 6.5-7.5 percent over the medium term,” World Bank lead economist for the Philippines Birgit Hansl said.
“In addition, higher private investment levels will be critical to sustain the economy’s growth momentum as capacity constraints become more binding,” Hansl added.
The latest Bangko Sentral ng Pilipinas data showed that job-generating foreign direct investments during the January to April period posted net inflows of $3.2 billion, 24.3-percent higher than last year.
Total investment pledges by foreign and Filipino firms rose 52.3 percent to P185 billion in the first quarter from P121.5 billion a year ago, the latest Philippine Statistics Authority data showed.
Local investors accounted for P170.8 billion or 92.3 percent of the three-month approvals made by seven investment promotion agencies from January to March.
Commitments
However, commitments of foreign investors fell 37.9 percent year-on-year to P14.2 billion during the first three months, the lowest quarterly commitments since 2010.
Also, the World Bank said “exports, a key driver of growth for the Philippines economy, are projected to moderate in the coming years as global growth is expected to decelerate.”
The latest PSA data showed that merchandise exports as of end-May declined to $26.9 billion from a year ago’s $28.3 billion.
This month, the Cabinet-level Development Budget Coordination Committee (DBCC) cut the merchandise exports growth target for 2018 to 9 percent from 10 percent previously.