World Bank upgrades 2023 Philippine growth forecast to 6%

Multilateral lender World Bank is expecting the Philippine economy to grow faster this year than its earlier assumption, banking on sustained domestic consumption despite high inflation and persistent global headwinds.

In the June 2023 edition of its Philippines Economic Update report released Wednesday, the World Bank upgraded its 2023 gross domestic product (GDP) growth forecast for the country to 6% from 5.6% growth projection in the April 2023 East Asia and Pacific (EAP) Update.

“[T]he better-than- expected resilience of private domestic demand despite high inflation and tight financial conditions early in the year, led to the country’s growth upgrade for 2023 compared to the projection in the EAP Update April 2023,” the Washington-based multilateral lender said in its report.

The World Bank’s upwardly adjusted outlook falls within the Marcos administration’s economic team’s 6% to 7% growth target for 2023.

At a virtual press briefing, World Bank senior economist Ralph Van Doorn, however, said that downside risks may come from external and domestic factors.

Doorn cited “the possibility of high-than-expected global inflation, tighter global financing conditions and an escalation of geopolitical tensions” that “could further disrupt global activity and cause a sharper-than-expected global slowdown.”

“High inflation remains a risk, while sticky core inflation due to tight labor market and resilient demand could lead to further monetary tightening,” the World Bank senior economist said.

Doorn added that the threat of El Niño and supply chain bottlenecks may raise food supply challengers and place upward pressure on food prices.

In its report, the World Bank said that private consumption is expected to remain strong at 6.1% in 2023, supported by recovering employment, improving consumer sentiment, a reduction of personal income tax rates beginning in 2023, and a steady inflow of remittances.

World Bank country director for Brunei, Malaysia, the Philippines, and Thailand Ndiamé Diop said the implementation of recently passed liberalization reforms such as the amendments to the Public Service Act, Foreign Investment Act, and Retail Trade Liberalization law — seen to allow greater foreign participation in the economy — will encourage private investment and strengthen growth in the country over the medium term.

Against a backdrop of global and domestic risks, Diop said, “It is essential to sustain improvements in social protection to help families, especially the poor and vulnerable, cope with economic difficulties as the country navigates the global slowdown, budget constraints, high prices of basic commodities, and climate-related risks.”

Doorn, likewise, said that “in the face of escalating prices, a comprehensive strategy is needed to guarantee sufficient food for everyone.”

“This entails a more productive agriculture and food system that is resilient to climate risks, serves all consumers, and competes effectively on both local and global markets,” Doorn said.

The Philippine economy, as measured by GDP or total value of goods and services produced in a specific period, grew by 6.4% in the first quarter of 2023, albeit slower than the 8% growth rate seen in the same period last year due to dampened consumption amid high inflation. —KG, GMA Integrated News