More investments, gov’t spending in infra urged

The Philippines needs more private-sector investments and increased government spending in infrastructure and social-protection programs to temper the effects of the global economic crisis, according to a new World Bank report.

The Philippine Quarter Update (PQU) released Thursday said that improved tax administration and policy reforms would enable the government to fund its priority spending targets while keeping fiscal sustainability.

Improved revenue collection, achieved by broadening the tax base and improving efficiency and transparency in tax collections, will help ensure availability of funds for important programs such as the conditional cash transfer (CCT), the World Bank said.

Preliminary results indicate that the CCT program has been effective in improving the welfare of the poor in the short term, the report said.

“Given the worsening global scenario, investments by the private sector and government spending on key infrastructure as well as education and health will need to rise substantially to cushion the impact of the global crisis, sustain growth as well as create more and better jobs in the Philippines,” said World Bank Country Director Motoo Konishi in a statement.

The PQU expects the Philippine economy to grow 4.6 percent this year, taking into account the country’s strong growth of 6.4 percent in the first quarter.

It warned that the country’s economic momentum faces risks from the global economy, which is projected to slow down to 2.5 percent this year from 2.7 percent in 2011.

The ongoing European debt crisis and the slowdown in China pose risks to growth, the World Bank said, with main channels of contagion to the Philippines include direct exports and remittance linkages to Europe.

World Bank said that remittances would continue to grow albeit at a slower rate while services would remain stable backed by more jobs from the business process outsourcing industry.

But it added that if the global economic slump intensifies, some sectors in the Philippine manufacturing industry such as electronics would be affected, resulting in job losses.

The report, however, said that the Philippines has strong macroeconomic fundamentals—low inflation, a flexible exchange rate, a current account surplus, manageable government finances, high international reserves equivalent to almost a year’s worth of imports, and steady remittances—which would favor the country amid global uncertainties.