The World Bank (WB) expects the Philippine economy to expand by 6.4 percent this year, with election spending and lower inflation projected to boost private consumption.
The Bank also sees the country’s gross domestic product (GDP) growing 6.5 percent in 2020 and 2021.
These new estimates are lower than the previous WB’s forecast of 6.5-percent growth in 2019 and 6.6 percent in 2020 released last January, owing to the delay in the 2019 budget approval and the slowing down of global trade that can lead to weaker demand for Philippine exports, according to the Philippines Economic Update (PEU) released on Monday.
“Growth outlook remains positive fueled by an expected acceleration in private consumption growth, but tempered by a slowdown in public investment,” WB senior economist Rong Qian said in a media briefing.
Qian pointed out private consumption growth is expected to accelerate this year as inflation decline and election activity provide an added boost.
“However, the delay in approving the 2019 budget and the pre-election spending ban on new public construction project are expected to slow down public investment spending in the first half of the year, but is expected to recover towards the second half of 2019 assuming the budget gets approved very soon,” she said.
Qian also cited other risks that can affect the Philippines’ overall growth prospects, among them the El Niño phenomenon, which the Bank expects will reduce farm output and raise food prices.
“The intensified El Niño may lead to food supply constraint affecting the poor and vulnerable the most, as they are spending a relatively larger proportion of their income in food,” she said.
“I think the El Niño is still developing so we don’t have estimates of exactly how much is the impact. Ultimately, the El Niño had an impact on agriculture products, which translates to higher inflation,” she added.
The report also highlights the risks posed by external factors, including the potential escalation of trade tensions between the United States and China, and weak demand for the country’s exports.
Qian further said exports growth is likely to remain weak as global export is projected to remain weaker amid moderation of global growth in the medium term.
The Philippine economy grew 6.2 percent in 2018.