MANILA -- The World Bank (WB) expects the Philippine economy to speed up in the second half of 2018 and in early 2019, and will continue to be among the fastest-growing economies in Southeast Asia this year despite inflationary pressures and rising global uncertainty.
The WB slightly lowered its economic outlook for the Philippines to 6.5 percent from 6.7 percent this year due to slower first-half growth, but maintained projections for 2019 and 2020 at 6.7 percent and 6.6 percent, respectively.
Birgit Hansl, WB lead economist for Brunei, Malaysia, Philippines and Thailand, said continued domestic demand and consumption spurred by high remittances will drive the Philippine economic growth this year.
“And you have high level of investments which is now really driven by public investments in infrastructure and that is really helping to boost growth in the current external environment where we see less external demand generally across many of the exporting countries,” she said in an interview with the Philippines News Agency on Thursday.
Hansl said investments will be also supported by pre-election spending, which is expected to increase in the run-up to next year’s polls.
“(That) will help to keep consumption growth and also investment growth at high level,” she added.
The multilateral lender said growth slowed down in the first half of 2018 due to weak exports of electronics and lower production from agriculture and fisheries due to unfavorable weather conditions.
In a press briefing, WB senior economist Rong Qian stressed “the inflation is a downside risk. But in the first half, inflation was also high but consumption also remained robust so it shows that the Philippines is resilient to inflation.”
Hansl attributed the high inflation mainly to a rise in food prices brought about by supply constraints.
She noted that another big component driving inflation is electricity, utilities and fuel prices for transportation, which are affected largely by external environment.
“...We also see that central bank’s reaction is the right one -- tightening monetary policy. Over the next year, we foresee the peaking of inflation and slow retreat,” she said.
The WB’s newly-released Philippines Economic Update (PEU) report also noted the considerable risks to the current growth forecasts, among them increasing global uncertainty due to trade tensions between the United States (US) and China, as well as the rising interest rates in the US.
This could raise external financing cost and further weaken the peso, it added. (PNA)
