The World Bank (WB) has projected a 6.9 percent growth of the Philippine economy, reflecting the current construction boom following the devastation caused by the natural disasters.
The WB forecast was slightly lower than the government’s growth target of 7 percent last year with a projected decline in the first quarter of 2014 following the damage caused by typhoon Yolanda.
The WB report noted that typhoon Yolanda had a large humanitarian impact and has cut deeply into the activities in Central Visayas but its impact on the country’s overall economic growth is likely to be limited, reflecting about a 0.9 percent decline in growth in the fourth quarter of 2013, leading to a marginal 0.2 percentage point fall in annual growth rate compared with pre-crisis projections.
Dollar remittances expanded by an estimated 5.8 percent in 2013 and would likely accelerate in the wake of the typhoon.
The WB report stressed the need to undertake structural reforms and re-balance the economy from its excessive dependence on consumption, while at the same time prioritizing investment, to rebuild the typhoon –stricken portions of the economy.
“Careful management of fiscal levers may be requested to direct spending toward the affected areas and away from overheating sectors elsewhere,” the report added.
In its latest global economic outlook, the WB reported a growth moderation of 7.2 percent in 2013 in the East Asia and the Pacific region from 7.4 percent in 2012.
Growth in China was unchanged from the 7.7 percent recorded in 2012.A one percentage point slowdown in growth in the rest of the region reflected a moderation of economic activity in
Indonesia, Malaysia, Thailand and a sharp slowdown in Papua New Guinea that resulted from completion of construction of a major liquid gas facility.
Because output in the region was capacity-constrained at the onset of the 2008–09 crisis, domestic policy induced a quick rebound from the economic slowdown in 2009, leaving output in the region close to or above capacity, the WB report said.
“Continued fiscal and monetary stimulus in the post-crisis period combined with the strong foreign inflows exacerbated imbalances, leading to a rapid expansion of credit, deteriorating current account positions, and growing asset price pressures in several countries between 2007 and 2012.”
The WB report expects global GDP growth to gradually firm from 2.4 percent to 3.5 percent in 2016. Global trade flows are also projected to recover from their current low levels of 3.1 percent to 5.1 percent by 2016.
Increased trade will particularly benefit exporters of manufacturing products and services in China, Malaysia, Pacific Islands, the Philippines, Thailand and economies with relatively low unit labor costs and competitive exchange rates in Cambodia, Lao PDR,Myanmar and Vietnam.
Declining commodity prices are however, projected to weigh on for commodity exporters in Indonesia, Malaysia, Mongolia, and Papua New Guinea.
Full-year growth for China is expected to remain at around 7.7 percent in 2014, but the quarterly pace should slow somewhat toward the second half of the year, with growth projected to stabilize at around 7.5 percent in 2015 and 2016, the report said.
The WB also expects growth in the rest of the region would also be broadly stable in 2014 but is projected to pick up in 2015 to 5.7 percent reflecting modest acceleration in Indonesia and Thailand, reconstruction efforts in the Philippines, and the start of production of Papua New Guinea Liquefied Gas before settling at 5.5 percent in 2016.