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DESPITE
the fact that the
Philippines,
like the East Asia and Pacific region, will be resilient
to global economic shocks, economic growth will be
slower this year and in 2009, according to the World
Bank (WB).
In the
latest East Asia and Pacific Update, the bank projected
the country’s gross domestic product (GDP) to slow down
to 5.9 percent in 2008 and 6.1 percent in 2009.
These
projections are lower than the November issue of the
report, which forecasted a 6.2-percent growth in GDP
this year, and the Global Economic Prospects (GEP)
report of the bank, released in January this year, which
pegged GDP growth in 2009 at 6.5 percent.
The
bank’s latest projections are also lower than the
December 2007 projections of the Development Budget
Coordination Committee (DBCC), which are pegged to be
within the range of 6.3 percent to 7 percent this year
and 6.4 percent to 7.1 percent in 2009.
“Despite
domestic political tensions and increased market
volatility, the Philippine economy performed unusually
well in 2007—ending the year with its highest growth in
three decades, benign inflation, a strong
balance-of-payments position and an improving
public-sector fiscal situation. Notwithstanding this
performance, the economy continued to show persistent
structural weaknesses—a low tax effort, high
unemployment and underemployment and rising poverty,”
the report said.
“These
weaknesses, together with mounting global uncertainties
and domestic political instability, raise concerns
whether the economy’s high growth can be sustained over
the medium term,” the report added.
World
Bank (WB) lead economist Vera Songwe said the
Philippines must implement stronger policies that will
help it achieve higher and more sustainable growth.
“The big
issue is we don’t see investments picking up. These are
needed to sustain growth and create jobs and lift more
people from poverty,” Songwe said at a briefing at the
World Bank office in Pasig City.
She said
the government must also encourage private investment
growth, which has remained weak, particularly in durable
equipment. She said private investments will help the
recovery of exports, which has slowed down to only 3
percent, reflecting the slow demand in the US and Japan.
“For you
to have good growth and reduce poverty very fast, you
have to grow sustainably for at least 10 years. The
Philippines is at the five-year mark. I think the
challenge is to decide if we continue to go up, or we’re
gonna stabilize or we’re gonna go down,” Songwe said.
And,
while the
Philippines
has topped its peers in achieving the fastest economic
growth, this is not enough to really lead the region.
She
explained that from 2004 to 2007, the country had good
growth and that the issue now is how it can ensure that
growth is kept and accelerated.
“[If] we
want to be able to lead the region eventually, we need
to get [a growth of] 8 percent to 9 percent and 10
percent, eventually, if that is possible,” Songwe said.
However,
overall, WB chief economist Vikram Nehru said the region
would still represent a significant amount of exports,
owing to increased intraregional trade and
diversification of export markets, such as Europe and
Australia.
“These
will be testing times for
East Asia. The question is, will the upward trend of growth for
East
Asia be affected by the US slowdown?” Nehru said during
the videoconference at the bank’s office in Pasig City.
The bank
said in a statement that the real challenge for
governments in the region, including in the
Philippines,
would be addressing the inflationary effect of mounting
food and fuel prices, especially because of the harsh
effects on the poor.
With
external conditions increasingly becoming adverse,
growth in the region is likely to slow down in 2008.
However, the report notes that the Philippines has
accumulated substantial reserves of over $30 billion,
which should help the country cope with the cyclical
downturn and potential shocks.
“Sustaining growth and making it more inclusive is now
the challenge. At last week’s Philippines Development
Forum, government and development partners discussed
what it takes to meet this challenge. These include
measures, such as strengthening tax administration,
expenditure management and procurement processes;
providing higher quality and quantity of infrastructure;
and investing more in people, especially in basic
services for the poor,” WB Philippines Country Director
Bert Hofman said. |
