The Philippines is one of the most dynamic emerging markets in the East Asia region, with sound economic fundamentals and a competitive workforce that is globally recognized. Growth in the Philippines has been on average about 5 percent since 2002, significantly higher than the rate achieved in the previous two decades.
Following robust 7.2 percent growth in 2013, growth moderated in 2014 to 6.1 percent. The moderation can be mainly attributed to the sharp deceleration of government consumption, the contraction in infrastructure spending, and weak agricultural production. The services sector—the main engine of growth—also slowed. Nevertheless, Philippine growth remains among the fastest when compared to the major economies in the East Asia region, trailing only China. In 2015, the economic growth is expected to rebound to about 6.5 percent, if the government fully utilizes its budget as planned and accelerates reforms.
The country has earned investment grade ratings from major credit rating agencies as a result of sound macroeconomic fundamentals characterized by sustained growth, low and stable inflation, and sound fiscal management. Moreover, robust remittances have provided a strong basis for currency stability and a healthy buildup of international reserves. The country currently enjoys a savings rate that exceeds investment, while its human resources continue to be in high demand around the world. With GDP growth having reached its potential, utilizing the country’s vast savings to fund much needed infrastructure will be required to sustain high growth in the following decades.
In recent years, the Philippines has proven itself resilient to food and fuel price hikes, the global financial crisis and recession, and the impact of typhoons and El Niño.
The country’s progress in achieving the Millennium Development Goals (MDGs) is generally on track in improving gender equality in basic education and reducing infant and child mortality. While the country is also making headway in combating tuberculosis, malaria and other major diseases, and in providing access to safe water, it needs to intensify efforts in reducing poverty, achieving universal primary education and in improving child and maternal health. It also needs to address the lack of good jobs among low-income earners, especially those from rural areas where many poor people reside.
To address these challenges and to achieve inclusive growth, the government is pursuing the following measures under its (2011-2016) updated Philippine Development Plan:
* Attain high and sustained economic growth that provides productive employment opportunities;
* Promote equal access to development opportunities through better education, primary health care and nutrition and other basic social services; equal access to infrastructure, credit, land, technology, and other productive inputs;
*Reduce the cost of doing business, consistent with upholding good governance and strong institutions to encourage competition; and
*Establish effective and responsive social safety nets to assist those who are less capable of participating in economic activities
This means making sure no one, especially the poor, is left behind. Households and communities most at risk for poverty should have better income opportunities and less vulnerability to sudden economic difficulties and natural disasters. They should have better education, good health care, as well as access to infrastructure and information to improve their lives and to participate in growing the economy.
The new strategy is in line with the World Bank Group’s new twin goals of eradicating extreme poverty and promoting shared prosperity. It also supports the country’s goal of promoting and sustaining inclusive growth that reduces poverty and creates more and better jobs—jobs that raise real wages or bring people out of poverty. The new strategy continues to support the country’s development programs in five key engagement areas:
• Transparent and accountable governance: strengthening public financial management, improving fiscal transparency and financial accountability, and supporting greater demand from citizens for government accountability.
• Rapid, inclusive and sustained economic growth: promoting economic policy reform for inclusive growth, boosting private sector development by improving the investment climate for firms of all sizes, including greater access to finance, and increasing productivity and job creation, especially in rural areas.
The World Bank Group (WBG) will support transformational programs and projects that work across sectors to deliver tangible results which have high and long-term impact. The International Bank for Reconstruction and Development (IBRD) and the WBG’s private sector arm, the International Finance Corporation (IFC) will work closely together to mobilize private sector investment and support job creation in areas such as agriculture and agribusiness, trade and logistics, infrastructure and public-private partnerships.
The indicative new financial commitment from the IBRD may average $800 million a year, along with non-lending support in the form of analytical and advisory assistance. As of January 2015, the Philippine portfolio comprises 16 active projects with a total net commitment of $3.8 billion. This includes 11 investment loan operations, two development policy operations and four trust funds that are part of the lending portfolio.
As of January 2015, IFC has a committed portfolio of $741 million (including mobilization of $100 million.) It has been active in both the infrastructure and financial institutions sectors in the country, with $311 million and $261 million current investments (for IFC’s account only), respectively. Investments in power and utilities dominate the infrastructure portfolio while financial institutions are spread across eight partner institutions, including commercial and thrift banks, distressed asset platforms, an investment fund and real estate developer.
Philippines: Commitments by Fiscal Year (in millions of dollars)*
*Amounts include IBRD and IDA commitments
Since 1957 when the government received its first World Bank loan, the Bank has financed irrigation and other agriculture-related infrastructure and rural development needs that have produced significant results for its citizens. The Bank’s assistance later expanded to a wide range of lending and knowledge products, policy advice and capacity development in support of the country’s development agenda.
Encouraged by good results, the government has expanded the CCT program to include children in secondary education, which is supported by new financing. The program, which aims to break the cycle of poverty in the country, has grown to become one of the largest in the world.
In the water and sanitation sector, the Bank has been supporting the government’s efforts to improve services across the country by partnering with service providers and local government units. Residents with improved access to drinking water increased from 85% in 1990 to 92% in 2010, while access to sanitation facilities improved from 57% to 74% over the same period.
In Metro Manila, the Bank’s interventions through Manila Water Company (MWCI) contributed to a dramatic increase in 24-hour water supply from 26% in 1997 to 99% in 2009 as it expanded coverage of sewerage, sanitation and septage management. Through IFC’s advisory and investment support since the 1990s, the company has more than doubled its customer base to 6.2 million people, reduced system losses from 63% to 11% and has grown to be the largest wastewater operator in the Philippines.