MANILA, October 10, 2019 – Amidst rising global uncertainties, the Philippine economy remains strong and is projected to grow 5.8 percent this year and 6.0 percent in 2020 and 2021, according to the Philippines Economic Update, released today by the World Bank.
Weakening global economy, rising protectionism, the United States – China trade spat, and the slowdown in public investments in the Philippines in the first half of the year have tempered the country’s growth prospects.
Nevertheless, strong private consumption – due to lower inflation, higher employment rates, robust remittances, and rising wages – and a recovery in public investment spending will keep the economy buoyant. Also, the services sector will drive growth fueled by the continuing expansion of financial services and tourism.
"Given the global environment, resuming the fast pace of expansion in infrastructure and human capital spending will be key for the Philippines to regain higher growth momentum while continuing to lay the foundation for greater inclusion,” said Mara K. Warwick, World Bank Country Director for Brunei, Malaysia, Thailand and the Philippines. “Timely passage of the 2020 budget and decisive action on the country’s tax reform program will remove uncertainties and help the private sector make timely decisions, boosting job creation.”
The report projects that Philippines will sustain progress in reducing poverty despite the temporary slowdown in economic growth in the first half of 2019. More workers are finding gainful employment outside agriculture, real wages are rising, and inflation rates are stabilizing. Also, the continuing implementation of social programs like the Pantawid Pamilya, or 4Ps, contributes significantly to poverty reduction.
Using the World Bank’s US$3.2 dollar-a-day poverty rate, the poverty incidence is estimated to have declined from 26.0 percent in 2015 to 20.8 percent in 2019, a result of growth of incomes among poor households. The poverty rate is expected to dip further to 19.7 percent in 2020 and 18.7 percent in 2021.
“In the medium term, accelerating implementation of high-impact infrastructure projects and the recently approved critical reforms like the Ease of Doing Business Law and liberalization of the rice trade will help the country sustain inclusive growth that generates high-paying jobs and reduces poverty,” said World Bank Senior Economist Rong Qian.
Qian added that the passage of investment-friendly reforms such as amendments to the Public Service Act to allow foreign ownership in key sectors including telecommunication and transportation services, and the Retail Trade Liberalization Act that will allow greater competition in the retail trade sector, can attract more foreign direct investment and boost local productivity.
The report also stresses that promoting competition to generate quality jobs will enhance the impact of growth on poverty reduction in the Philippines over the long term. As many critical sectors of the country are dominated by a few players, the report recommends reforms to enhance competition in Philippine markets, including:
- Streamlining burdensome administrative procedures for businesses to make it easier to start a business, generating more competition in markets
- Eliminating restrictions on foreign as well as domestic investors to help level the playfield.
- Ensuring that state-owned enterprises compete on fair terms with private business, to promote more efficient use of public funds.