Benise Balaoing

The Makati-Taguig skyline in this photo taken on April 12, 2024.   Gigie Cruz, ABS-CBN News

Article (news)

PH ECONOMY

Andrea Taguines

ABS-CBN News

<h2>But growth seen to be more robust in 2025</h2><p>MANILA -- The World Bank lowered its 2024 growth forecast for the Philippines to 5.9 percent from 6 percent as severe weather disturbances took their toll on the economy. </p><p>In its latest Philippine economic update, the multilateral lender said the country should also see more robust growth in 2025 and 2026.</p><p>The World Bank said the country saw sustained growth momentum over the past three quarters. But it also noted how several typhoons have affected millions of people, destroyed crops and property, damaged infrastructure, and disrupted economic activity, particularly in tourism and construction.</p><p>Growth came in at a disappointing 5.2 percent in the third quarter due to a series of storms which affected government spending and agricultural output.</p><div><a href="https://www.abs-cbn.com/business/2024/11/7/philippines-posts-lower-gdp-growth-in-third-quarter-925" rel="noopener noreferrer" target="_blank">Philippines posts lower GDP growth in third quarter as bad weather bites</a></div><p>The World Bank, however, noted that growth will pick up to 6.1 percent in 2025, then 6 percent in 2026. The multilateral lender said growth will average 6 percent from 2024 to 2026, depending on the government&#x27;s ability to rein in inflation, implement a more supportive monetary policy to foster business growth, and sustain government spending on infrastructure.</p><p>Private consumption--or how much Filipinos spend on food, clothing, and entertainment--will be the main driver of the Philippine economy in the next two years, the World Bank said.</p><div><span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/SBX0uLm7qEA?&amp;ab_channel=ANC24%2F7autoplay=1&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe></span></div><p>It noted that low and stable <a href="https://www.abs-cbn.com/news/business/2024/12/5/inflation-quickens-to-2-5-percent-in-november-0911" rel="noopener noreferrer" target="_blank">inflation</a>, a steady inflow of <a href="https://www.abs-cbn.com/business/2024/11/15/cash-remittances-up-3-3-percent-in-september-1357" rel="noopener noreferrer" target="_blank">remittances</a>, higher <a href="https://www.abs-cbn.com/news/business/2024/12/6/unemployment-underemployment-rates-climb-in-october-0920" rel="noopener noreferrer" target="_blank">employment</a>, more credit, and falling <a href="https://www.abs-cbn.com/business/2024/11/7/recto-says-more-interest-rate-cuts-coming-in-next-few-months-1917" rel="noopener noreferrer" target="_blank">interest rates</a> will increase consumption.</p><p>Robust growth will speed up poverty reduction because of improvements in household incomes and strong job creation, the World Bank said.</p><p>But the Philippines remains vulnerable to extreme weather events like typhoons and heavy monsoon rains, said Country Director for the Philippines, Malaysia and Brunei Darussalam Zafer Mustafaoğlu.</p><p>World Bank senior economist Jaffar Al-Rikabi said the Philippines must boost its digital transformation while working on resilience to climate change and strengthening social protection for the vulnerable.</p><p>“Increased digitalization could provide expanded market access, build resilience to economic shocks, and increase the country’s productivity, efficiency, and competitiveness,&quot; he said.</p><p>Al-Rikabi also urged the Philippines to boost its human capital by improving Filipinos&#x27; health, education, and job skills.</p><p>“Our projections around growth tell a story that soon enough, I won’t say which month or year, the Philippines should achieve upper middle income status,” said Al-Rikabi.</p><div><span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/mS0zLjZEDic?&amp;ab_channel=ANC24%2F7autoplay=1&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe></span><br/></div><p>But he also noted that their outlook is much more tilted to the downside, citing risks such as global trade policy uncertainty and geopolitical tensions.</p><p>He said this is also one of the reasons why the World Bank’s growth projections for 2024 and 2025 both fall at the lower end of the Philippine government’s own targets.</p><p>The Philippine growth target has been narrowed to 6 to 6.5 percent from the initial target of 6 to 7 percent. </p><div><a href="https://www.abs-cbn.com/news/business/2024/12/2/dbcc-narrows-widens-growth-targets-for-ph-0001" rel="noopener noreferrer" target="_blank">DBCC narrows, widens growth targets for PH</a></div><p>“The growth projection we have is a baseline projection so, of course, more reform, faster, deeper, well implemented reforms could result in higher growth,” he said.</p><p>“But also the global environment matters right? If you have increased tariffs, this could drag on growth,” Al-Rikabi added, in light of the expected protectionist trade policies that will take effect under US President-elect Donald Trump.</p><p>So how should the Philippine government act?</p><p>World Bank Lead Economist Gonzalo Varela said the obvious response is to continue implementing investment-friendly initiatives and reforms that will make the country more competitive, especially considering regional neighbors like Vietnam, which has already greatly benefited from the trade rerouting that resulted from the US-China trade war.</p><div><strong>RELATED STORY:</strong></div><div><span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/b3z2BDHy5ks?&amp;ab_channel=ANC24%2F7autoplay=1&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe></span><br/></div><p>“One has to do with advanced reforms to decrease trade costs. On this area, the government of the Philippines has an agenda on free trade agreements,” he said.</p><p>“What are reforms we can do at home to attract more investment? This has to do with better regulation, streamlining regulations, reducing investment cost, increasing competition and upskilling the labor force that will help the Philippines seize opportunities,” he added.</p><p>Varela also said that the ongoing feud between Philippine President Ferdinand Marcos Jr. and Vice President Sara Duterte, as well as the upcoming 2025 elections should not be too concerning since “what matters for growth is policy stability.”</p><p>“Policy stability can be insulated from the political side. The PSA (Public Services Act) amendment, the DOE (Department of Energy) resolution to have majority stakeholder for foreign investments in renewable energy— these are important reforms that were initiated in one administration and were continued in another administration that contribute to policy stability,” he said.</p><div><strong>THE CATCHUP CHALLENGE</strong></div><p>But while on track to become an upper-middle-income country, the World Bank’s latest assessment also noted that the Philippines’ ability to catch up to the advanced economies has been slowing down.</p><p>It said this “rut” is actually common for many countries undergoing a similar transition.</p><p>Al-Rikabi said more investments in human capital, rather than just capital formation, is key to addressing this.</p><div><a href="https://www.abs-cbn.com/business/2024/6/27/dbcc-ph-to-reach-upper-middle-income-status-by-2025-or-2026-2213" rel="noopener noreferrer" target="_blank">DBCC: PH to reach upper middle income status by 2025 or 2026</a></div><p>“It is relatively easy to learn to build bridges, roads, connect your cities and villages. That gives you a lot of growth. But then if you want to grow even more, you need to be selling more and more to the world’s economy. You need to be selling goods and services of higher quality. That requires more investment in your people,” he said.</p><p>He also does not worry too much about the possible repercussions of the Philippines losing <a href="https://www.abs-cbn.com/news/business/2024/11/29/ph-to-be-upper-middle-income-country-but-will-lose-oda-benefits-1733" rel="noopener noreferrer" target="_blank">Official Development Assistance</a> benefits once it achieves an upper middle income economy status.</p><p>“With good fiscal management, we shouldn’t be worried too much about the interest expense bill. The key is to focus on, over the medium term, narrowing the fiscal deficit and ensuring efficient expenditure and tax policies,” he said.</p><p>He said this risk could also be minimized should interest rates continue to decline, which would reduce the interest expense on loans over time.</p>

<p>The Philippine economy is expected to grow by 5.9 percent in 2024, the World Bank said.</p>

The Philippine economy is expected to grow by 5.9 percent in 2024, the World Bank said.

World Bank lowers PH growth forecast as storms take toll

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World Bank lowers PH growth forecast as storms take toll

Benise Balaoing,

Andrea Taguines,

ABS-CBN News

Published Dec 10, 2024 06:21 PM PHT

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