The World Bank (WB) has predicted a 5 percent gross domestic product (GDP) growth for the Philippines in 2011 and 5.4 percent in 2012.
The WB forecast was lower than the 7.3 percent growth achieved in 2010, the highest since 1976, and in sharp contrast with the 1.1 percent expansion in 2009.
Last year’s economic growth was fuelled by private consumption, investment, and net exports.
In its latest East Asia and Pacific economic update, the WB said that to sustain the early achievements, the Aquino Administration needs to secure its revenue base to expand socially relevant expenditures, and strengthen the investment climate.
The report noted that to markedly raise revenues, tax policy measures are needed to supplement ongoing administrative efforts.
“Key tax policy measures that would quickly raise revenues and improve social outcomes are increases in the excise tax rates of alcohol, tobacco, and petroleum.”
“Additional measures could include—after fixing the deficient VAT refund process—increasing the VAT rate and further broadening its base, possibly coupled with some reduction in the income tax rates.”
To expand investment in a sustainable fashion and improve the prospects of public-private partnerships, the WB urged the government to address the long-standing infrastructure bottlenecks especially power supply, strengthen governance, and improve the business environment.
The report also noted that for the first time in 11 years, the 2011 budget was enacted prior to the start of the budget year.
“Timely passage of the budget will allow the government to front-load a significant amount of the expenditure program, especially infrastructure spending, in the first three quarters of 2010.”
“As expected, key provisions of the President’s proposed budget were left untouched by Congress despite earlier opposition. These include the more than two-fold increase in the budget for the conditional cash transfer program to cover about half of the poor households and the 19 percent increase in the budget for basic education.”
These programs are expected to help curb the rising poverty incidence in the country, the report added.