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WEAK
export growth and the increase in commodity prices will
cut economic growth in the Philippines as well as other
developing countries and East Asian economies, according
to the latest study of the World Bank.
Per the
World Bank’s Global Development Finance 2008, the
country’s gross domestic product (GDP) will slow to 5.8
percent this year but will slowly inch up to 6.1
percent and 6.2 percent in 2009 and 2010, respectively.
The
report also projected the country’s current- account
balance as a percentage of GDP to hit 2.4 percent in
2008, 2.9 percent in 2009 and 3.8 percent in 2010. In
2007 the current-account balance was 4.3 percent of GDP.
The
Development Budget Coordination Committee (DBCC) now
forecasts the country’s GDP to slow down to 5.7 percent
to 6.5 percent in 2008 and 6.2 percent to 7 percent in
2009. However, by 2010, Neda chief Agusto Santos said
the government projects higher economic growth at 6.8
percent to 7.6 percent.
The
report said growth in the
East Asia and Pacific region will remain strong. GDP growth is expected to ease by
almost 2 percentage points to 8.6 percent in 2008, the
lowest since 2002.
Due to
an unfavorable global market for exports, said the
report, the contribution of net exports to GDP growth
for the region will soften to 1.2 points by 2010 from
3.5 points in 2007.
However,
economic growth in the region is projected to moderate
in 2009 and 2010, at a pace of 8.5 percent and 8.4
percent, respectively.
“Despite
the softening trend, overall GDP growth [in East Asia]
is still significant and higher than in other developing
regions. Lower export growth will be one of the main
factors sending output gains lower,” the report stated.
“Export
growth is expected to continue to temper into 2008 and
early 2009 as the decline of exports to the United
States is compounded by a slowdown in the European Union
and Japan,” the report added.
However,
despite the projected strong growth that will come from
East Asian economies this year and the next two years,
higher food and oil prices could cut the region’s
aggregate income by 1 percent of GDP this year.
The
report said economic growth in countries in the region,
including the Philippines, is under threat from surging
rice and commodity prices, particularly due to severe
weather conditions in the beginning of 2008.
Severe
weather conditions have significantly reduced domestic
supply of rice and food, with droughts and strong
typhoons hurting production in several parts of the
region.
“Countries in the region are vulnerable to a continued
acceleration in inflation tied to higher food and fuel
prices, the possibility of a sharper-than-expected
slowdown among the high-income countries and a potential
deterioration in global financial conditions,” the
report stated.
Apart
from this, the World Bank warned of a second downside
risk in the depth and duration of any
United States
downturn, given the still dominant role that
US
import demand plays in most economies of the region.
The bank
believes that a slowdown in the US would exacerbate the
slowdown currently experienced by East Asian and Pacific
exports. The only silver lining the bank sees is the
fact that in the event of a US slowdown, its effect will
not be rapid and will not immediately impact trade and
financial channels.
Meanwhile, the World Bank believes the strong growth in
East Asia and developing countries like the Philippines
will keep world GDP afloat and prevent it from
experiencing a drastic slowdown.
The bank
projected a slowdown in world GDP growth to 2.7 percent
in 2008 from 3.7 percent in 2007. Growth in developing
countries is expected to slow to a respectable 6.5
percent in 2008 from an extraordinary 7.8 percent in
2007.
“Strong
growth in the developing world is certainly helping to
offset the sharp slowdown in the
US.
But at the same time, rising global inflationary
pressures—especially high food and energy prices—are
hurting large segments of the poor around the world,”
said World Bank Development Prospects Group and
International Trade Department Director Uri Dadush in a
statement. |
