World Bank downgrades outlook on PHL economic growth for 2018

The World Bank on Thursday downgraded its economic growth forecast for the Philippines for this year, following the slower-than-expected growth in the first six months of the year.

According to the Philippines Economic Update (PEU) released by the World Bank on Thursday, economic growth is now pegged at 6.5 percent this year, lower than the earlier forecast of 6.7 percent.

The update came after growth slowed to 6.0 percent in the second quarter of the year from the 6.7 percent in 2017, being the year-to-date growth to 6.3 percent.

"Heightened global uncertainty and rising domestic inflation weighed on the Philippine economy in the first half of 2018," Rong Qian, senior economist for the World Bank in the Philippines, said at a press conference in Taguig City.

Palace reaction

Malacañang said it respects the decision of the World Bank to lower the growth forecast.

"We respect the lowering of forecast and we note that the lowering is not really a major lowering, it’s .2," presidential spokesperson Harry Roque said at a news conference.

"We expect the Philippine economy to still grow at the very robust growth rate of 6.5 [percent]. That should still make us the second fastest growing economy in the world if it does happen."

Roque added the government is addressing inflation through measures such as removing administrative constraints and non-tariff barriers in the importation of agricultural products and ensuring efficient delivery of agricultural goods and price stability.

This is the third downgrade so far on the Philippine economic outlook after the International Monetary Fund (IMF) last week revised lower its outlook to 6.5 percent from the 6.7 percent it earlier forecast.

Last month, the Asian Development Bank (ADB) also downgraded its outlook to 6.4 percent from the earlier outlook of 6.8 percent.

Among the downside risks cited by the World Bank are the rising interest rates in the United States which could raise external financing costs and eventually weaken the local currency.

"To manage these risks, maintaining strong macroeconomic fundamentals is key. At the same time, accelerating structural reforms to improve investments in physical infrastructure and make better use of capital, labor, and technology to increase productivity remains a very important agenda for the Philippines," said Mara Warwick, World Bank Country Director for the Philippines.

"In the long-term, sustaining high productivity growth is critical for the country to become a prosperous society free of poverty," added Warwick.

Despite the downgrade for this year, the World Bank retained its forecast for 2019 at 6.7 percent, and 2020 at 6.6 percent.

"The Philippines is fairly resilient against capital outflows compared to many of its neighbors in the East Asia Region," Birgit Hansl, lead economist of the World Bank for the Philippines, said separately. — with Virgil Lopez/RSJ, GMA News