World Bank sees 1.4% growth for RP

THE WORLD BANK has upgraded its growth forecasts for the Philippines, saying sustained remittance inflows, improved global recovery prospects, and increased public spending would allow targets to be met.

The Washington-based lender sees the economy expanding by 1.4% this year, a reversal from its July forecast of a 0.5% contraction. The upgraded outlook supports the official growth goal of 0.8-1.8%.

The bank’s sister organization, the International Monetary Fund, and the Manila-based Asian Development Bank also have forecasts -- 1% and 1.6%, respectively -- within the state’s target range.

The World Bank expects the economy to grow by 3.1% next year, up from the earlier outlook of 2.4%.

The revised forecasts came as the bank also upgraded its projection for East Asia, whose "rebound from the economic downturn has been surprisingly swift and very welcome."

The region will likely grow by 6.7% in 2009, up 1.3 percentage points than the earlier projection. Excluding China, the region’s output should expand by a slower 1.1%, it added.

The Philippine government’s fiscal stimulus, along with the additional impetus from reconstruction efforts in the wake of recent storms, would continue to bolster growth.

"Government consumption and public construction will continue to benefit from the national government’s spending in the remaining months of 2009. So, based on new data, we believe the government growth forecast for 2009 to be entirely feasible," World Bank Country Director Bert Hofman said in a briefing.

Money sent home by Filipinos abroad -- projected to grow by 4% this year -- and an improving labor market would buoy domestic consumption by 2.1% this year.

"As the economy weakened in 2009, the real value of peso remittances surged by about 8% compared to 0.3% in 2008," World Bank senior economist Eric Le Borgne said.

The bank also said signs of recovery had sprung up for exports as well as the corporate sector.

"Exports have good prospects. Exports have started to recover from their January trough, with the recovery firming up since May," Mr. Le Borgne said.

The World Bank expects merchandise exports to contract by 19% this year but said this should recover to 3% in 2010. The outsourcing industry will also give the economy an additional boost, it added.

The multilateral lender expects the Philippines’ budget deficit to be contained at 3.8% of gross domestic product, still above the government’s official goal of 3.2% or P250 billion.

It said further extension of a fiscal stimulus "beyond the envisaged deficit is not warranted," and said authorities had the leeway to keep policy rates where they are for the rest of the year.

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World Bank sees 1.4% growth for RP