The World Bank (WB) has raised its growth forecast for the Philippine economy to 6 percent in 2012 and 6 percent in 2013.
In its latest economic update report, the WB report noted that consumption, which accounts for 75 percent of GDP, is expected to drive overall growth underpinned by continued growth in remittances and higher government spending with the national elections next year.
The current account is projected to remain in surplus, driven by remittances and some recovery in electronics exports early in the year.
The report says that risks to the growth projection remain on the downside—the continued high levels of global economic uncertainty combined with weak economic activity in the G3, diminishing returns to quantitative easing in the United States with the looming fiscal cliff, and a slowing Chinese economy are weighing down on global growth prospects.
WB says a window of opportunity exists for the Philippines to accelerate reforms that become a platform for more inclusive and higher growth.
“The country is currently benefiting from strong macroeconomic fundamentals, political stability, and a popular government that is seen by many as committed to improving the lives of the people.”
Several reforms have successfully started, notably in public financial and debt management, anti-corruption, and tax policy.
With further structural reforms, especially in areas which will have more impact on the lives of the poor, along with investments in infrastructure, education, and health, the Philippines can take advantage of new opportunities arising from the global economic rebalancing and the strong growth prospects of the East Asia region, the report said.
“By building on its previous and current successes and by ensuring that it is prepared to take advantage of the opportunities that are coming its way, the government stands to make a significant difference in the lives of Filipinos.”
The WB report expects the country’s high growth could be sustained and made more inclusive provided that economic reforms are aggressively pursued to create more and better jobs and reduce poverty at a faster rate, more revenues are raised to finance higher spending in physical and human capital, and global growth is supportive and rebalancing in the region continues.