World Bank downgrades 2018 Philippine economic outlook

MANILA, Philippines – The World Bank downgraded the Philippines’ economic outlook for 2018 to 6.5% from 6.7%, but projected the economy to remain robust in the coming years.

According to the latest Philippines Economic Update (PEU), the economy is seen to grow at 6.7% in 2019 and 6.6% in 2020.

“Growth slowed in the first half of 2018 due to weak exports of electronics and lower production from agriculture and fisheries due to unfavorable weather conditions,” the World Bank said. 

Graph from the World Bank's Philippines Economic Update

The multilateral lender expected the country’s gross domestic product  (GDP) to speed up in the 2nd half of 2018 and in early 2019 due to the government’s infrastructure push. (READ: World Bank pitches ways to boost Philippine economic growth)

The country’s GDP slowed down to 6%, missing most market and analyst expectations. Economic managers were gunning for 7% to 8% for the growth to trickle down to the most marginalized sectors.

The government’s proposed 2019 national budget of P3.76 trillion, which is around 19.4% of the GDP, focuses on ramping up investments in infrastructure and education.

The share of expenditure allocated to public works is set to increase from 13.3% in 2018 to 14.8% in 2019.

The World Bank noted that the economy will remain strong despite external risks like the increasing uncertainty due to trade tensions between the United States (US) and China.

Rising interest rates in the US which could raise external financing costs and further weakening of the Philippine peso were also deemed as risks.

Graph from the World Bank's Philippines Economic Update

“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 Brunei, Malaysia, Philippines and Thailand. 

The World Bank recommended that the government focus on improving market competition through regulatory reforms, improving trade and investment climate policies and regulations, and reducing labor market rigidities and costs.

“[R]eforms that boost domestic growth and reduce vulnerabilities of the country’s farming and fisheries sector will be essential to sustain high and broad-based growth,” the report said. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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