World Bank retains 6.4% PHL GDP forecast, says downside risks remain elevated

The World Bank has kept its Philippine economic growth outlook at 6.4% for 2019, faster than the 6.2% the previous year but still slower than its earlier forecast, as downside risks to growth remain elevated.

In its World Bank East Asia and Pacific Economic Update titled Managing Headwinds presented on Wednesday, the multilateral lender said growth is still expected at 6.4%, but downside risks remain elevated.

"Key domestic risks come from the delayed implementation of the public infrastructure investment projects, partly caused by delayed 2019 budget approval, and policy uncertainty over tax reform programs that could prolong weakened investor confidence," the report read.

The World Bank earlier this month announced a cut in its growth forecast for the Philippines this year and the next, citing downside risks such as the reenacted budget and the El Nino phenomenon.

"In the medium term, the government's expansionary fiscal strategy could lead to fiscal sustainability challengers if not accompanied by revenue increases. Still, strong macroeconomic fundamentals are in place to buffer against shocks," the multilateral lender said.

Still, the World Bank said the medium-term growth remains "positive," with a recovery expected from the moderation experienced by the country in 2018.

Philippine economic growth slowed to 6.2% in 2018, slower than the 6.7% in 2017 and behind the already downward revised government target range of 6.5 to 6.9%.

"Growth is expected to be driven by higher private consumption growth on the back of subsiding inflation and strong election activities," said the World Bank.

"Capital formation growth may moderate in the first half of 2019 due to the budget approval delay and the implementation of the preelection spending ban on new public construction projects, but is expected to accelerate in the second half of 2019 as the public infrastructure investments regain momentum," it added.

Looking ahead, the World Bank said structural reforms will be needed to ensure that the inclusive growth is achieved.

"This requires a commitment to structural reforms that enhance market competition, encourage investments, and improve labor market condition," it said.

"Key initiatives include revisiting foreign participation limits in the domestic market and enhanced efforts to improve doing business in the country," added the World Bank. — RSJ, GMA News