Philippines’ Medium-Term Outlook Remains Positive: World Bank Report

Oct 2017
Philippines, October, 05 2017 - The Philippine economy is projected to continue its strong growth path in the next two years, riding on improved global demand for Philippine exports, robust domestic consumption, and expected higher government investments in infrastructure. In the long term, unlocking the potential of Mindanao is key to reducing poverty and achieving more inclusive growth in the country.

The Philippines Economic Update, released on October 5 by the World Bank, projects growth of 6.6 percent in 2017 and 6.7 percent in 2018 and 2019.

Steady consumption growth, improved remittances, and higher incomes, as well as an expansion of credit, are the main drivers of growth. Exports are projected to grow at a robust rate as stronger growth is expected in the Philippines’ main trading partners.

“An increase in public spending on infrastructure building is expected to boost investment growth,” said World Bank Lead Economist for the Philippines, Birgit Hansl. “Higher investment growth could push the country’s growth rate towards the upper end of the government’s target of 6.5 to 7.5 percent of GDP, but this is contingent on the public infrastructure program gaining full traction.”

Slightly lower economic growth might slow the pace of poverty reduction, but the report expects poverty reduction to continue as the government’s strategy for more inclusive growth strengthens.

The report also discusses some risks that could threaten growth. The ongoing US Federal Reserve rate hikes could cause further depreciation of the peso and continuing capital outflows. Rising protectionism in some developed countries could also affect remittances and foreign trade. Bottlenecks in the planning and project approval process can also hamper implementation of infrastructure projects.

Commitment to the government’s policy goals of achieving stable inflation, fiscal stability and security will help preserve consumer and business confidence, the report underscored.

In the long term, the report says that attaining peace and development in Mindanao is essential for sustaining progress nationwide.

“The central policy challenge for Mindanao and the rest of the country is how to accelerate inclusive growth, to create more and better jobs and reduce poverty,” said Mara K. Warwick, World Bank Country Director for Brunei, Malaysia, Philippines, and Thailand. “This task is more challenging in Mindanao, because of the long-standing armed conflict. While the government and other sectors of society are addressing the key drivers of conflict, programs that create jobs can strengthen the process of peace-building.”

A huge proportion of the country’s poor are in Mindanao, a province that has about 25 percent of the country’s population and 37 percent of the country’s poor. Mindanao is also a major source of the country’s food and farm products. Increasing productivity in this area, the report highlights, could reduce prices for food and other goods across the country and improve the competitiveness of the agriculture sector.

This strategy for job creation, the report says, may anchor on the government’s programs, focusing on:

Raising agricultural productivity and improving connectivity of the farms to the markets;
Boosting human development through greater investments in health, education and skills; and
Building effective institutions in conflict-affected areas for better service delivery.

Source : The Financial

Research Analysis Tools

The fund indexes, institution benchmarks and other market information displayed here are all Symbiotics designed analysis tools, created in-house by our analysts and experts. Symbiotics has one of the oldest track records in microfinance investment analysis dating back to the late 1990s; its indexes and benchmarks have been regularly used as markers by investors, asset managers, financial institutions and practitioners. These, as well as several other research products, are available through the Research Account. Click on the link below to find out more.

Learn More