World Bank raises PH 2021 growth forecast

The World Bank has raised its 2021 growth forecast for the Philippines to 5.3 percent— above the government’s goal— following the faster-than-expected third-quarter expansion, despite reimposed lockdowns to contain COVID-19’s Delta strain.

For 2022, the World Bank was less optimistic than the government as the Washington-based multilateral lender’s 5.9-percent growth forecast took into account the scarring effects of what was among the region’s longest and most stringent quarantine restrictions, which impacted on the Philippines’ business, labor, education and health sectors, World Bank Philippines senior economist Kevin Chua told a press briefing on Tuesday.

The World Bank’s Philippines Economic Update report for December 2021 showed a higher gross domestic product (GDP) growth projection for this year from 4.3 percent in September. The latest estimate was also more optimistic than the government’s downscaled 4 to 5 percent target range.

Omicron uncertainty

GDP growth averaged 4.9 percent during the first nine months after third-quarter output grew 7.1 percent year-on-year, above expectations.

World Bank country director for Brunei, Malaysia, the Philippines and Thailand Ndiame Diop told the briefing that the newest Omicron variant “added a layer of uncertainty, but we clearly see the recovery trend continuing in the last quarter of this year.”

“As the recovery gains traction, it will be important to enhance private-sector participation in the recovery by deepening current efforts to make the country’s business environment favorable to job creation while upskilling the workers so that they can benefit from new or emerging job opportunities,” Diop said in a separate statement.

“Reforms that open more sectors to foreign investments, streamline administrative procedures to facilitate market entry and encourage firms to adopt new technology are measures that can boost private sector growth, create more jobs, and strengthen recovery,” Diop added.

Diop said the near-term economic recovery outlook was rosier as long as the government sustained the rollout of large infrastructure projects as well as ramped up the nationwide mass vaccination program to reopen more economic sectors while protecting people from COVID-19 infections.

Chua urged fast-tracking jabs in rural areas, where vaccination rates remained low, compared to Metro Manila’s already 92 percent at present. To achieve herd immunity, the government targets to inoculate 70 percent of the 110-million Philippine population by the first quarter of 2022.

Scarring effects

While the World Bank’s GDP growth forecast for 2022 also inched up to 5.9 percent from 5.8 percent previously, it was below the government’s 7 to 9 percent target.

“Why are we not as especially bullish as the government? One of the key reasons would be that we are seeing scarring in our country,” Chua said.

Chua pointed to at least 10 percent of firms in the country shuttered by the pandemic-induced economic slump, which resulted in lost jobs and incomes; the expected rise in poverty; as well as learning disruption due to schools’ closure, which he said would hurt human capital accumulation and productivity moving forward.

Chua said these adverse effects slashed the Philippines’ potential long-term GDP growth from 2020 to 2029—estimated to average 6.1 percent prepandemic—to a lower 5.7 percent.

He nonetheless said that if the government, especially the incoming new administration in 2022, could focus on productivity enhancement, “there are many good things that can still happen.”

For instance, “if we can pursue digitalization, which will be really important, it could even drive our potential GDP growth up,” Chua said. INQ