World Bank is bullish on Philippines despite dark clouds

The bank expects Philippine gross domestic product growth to land near the middle of the government target range of 6.5 to 7.5 per cent for 2017. Additionally, it is confident that the government can sustain economic gains that spread the wealth more equably.
The World Bank’s April 2017 Philippine Economic Update forecasts 6.9-per-cent GDP growth for this year and 2018, slowing slightly to 6.8 per cent in 2019. Those forecasts are below the government’s target range of 7-8 per cent, but are nevertheless among the highest globally.
However, there is a caveat. World Bank Philippines lead economist Birgit Hansl told media that the lender was bullish on the Philippines given the Duterte administration’s commitment to ramp up public infrastructure spending, which is key to sustaining the country’s growth momentum through 2018 and reinforcing business and consumer confidence. Hansl noted that the implementation of the planned infrastructure projects could generate positive spillover effects for the rest of the economy, spurring additional business activity, accelerating job creation and ultimately contributing to higher household consumption and poverty reduction.
World Bank Philippines country director Mara Warwick had already noted that strong growth in recent years was accompanied by job generation and a declining extreme poverty, as economic growth became “more inclusive”. Indeed, unemployment fell to a historic low of 4.7 per cent in 2016 as 1.4 million net jobs were created, while poverty incidence among Filipinos dropped to 21.6 per cent in 2015 from 25.2 per cent in 2012, as 1.8 million Filipinos were lifted out of poverty.
But not everything is rosy. As former economic planning chief Cielito Habito has pointed out in his columns in the Inquirer, there are dark clouds over the economy. He cited the rise in inflation to two-year highs, persistent unemployment, and slowing economic growth. Then there is the uncertainty about the global economy, particularly given US President Donald Trump’s protectionist tendencies.
The crucial thing now is for lawmakers to pass the Duterte administration’s comprehensive tax reform programme, which is needed to help finance the ambitious infrastructure plan. The government intends to increase infrastructure spending to the tune of 8 trillion pesos (Bt5.5 trillion) over the next five years, seeking to spur development and ease traffic congestion by building new roads, bridges, railways and airports. These projects, in turn, will generate jobs to address the unemployment problem.
In the meantime, the Philippines can still bank on two growth drivers – remittances from overseas Filipinos and earnings from business outsourcing. Cash sent home by Filipinos living and working abroad reached a record $26.9 billion (Bt921 billion) last year, up 5 per cent from 2015. Revenues from the outsourcing sector have been projected to overtake remittances from overseas Filipinos this year. In 2016, the industry generated over a million direct jobs and more than $20 billion in revenues.
So long as the billions of dollars from overseas Filipinos continue coming in and the billions of dollars earned by outsourcing workers remain here, consumer spending will sustain economic growth. These will augment household consumption and ensure the continued expansion of other economic segments, among them the property and retail sectors. As it is, the economic view now should be one of guarded optimism.