NextGen Day

The Philippine economy is predicted to become one of the best performers in the region this year, but growth will still fall short of government forecasts due to downside risks, according to the World Bank.

The Washington-based international lender kept its GDP predictions for the Philippines till 2023 in its latest Global Economic Prospects report.

The World Bank predicts 5.9% growth this year and 5.7 percent growth in 2023, which are the same predictions it made in its December economic update.

“Growth in the Philippines is forecast to decrease to 5.7 percent in 2023, supported by continuing public investment and recovering household spending,” according to the World Bank.

While the Philippines is expected to have one of the highest GDP growth rates this year, it is still well below the government’s targets of seven to nine percent for 2022 and six to seven percent for 2023.

The World Bank also kept its GDP prediction for 2021 at 5.3 percent. On January 27, the government will reveal full-year economic growth figures.

Palau and Fiji are the fastest-growing countries in the East Asia Pacific area, with growth rates of 12 percent and 7.8 percent, respectively.

However, in 2021, these two island countries are anticipated to see 16 percent and 4.1 percent declines, respectively.

This year, the Philippines is expected to develop at a quicker rate than Malaysia (5.8%), Vietnam (5.5%), and even China (5.1%). This year, the region’s GDP is expected to expand by 5.1 percent.

Despite the upbeat prognosis, the World Bank warned that there are still downside risks in the country and region.

Even as vaccination rates continue to rise, the international lender said a pandemic revival poses a substantial danger due to the tremendous uncertainty surrounding the highly transmissible Omicron form.

“Recurrent mobility limitations in the context of pandemic resurgence, incomplete vaccines, and insufficient testing might disrupt activity, erode consumer confidence, and delay tourism and travel recovery,” according to the World Bank.

“Recovery of output to pre-pandemic levels is not predicted until 2022 (Cambodia, Malaysia, the Philippines) or 2023 (Thailand, several tiny Pacific island economies),” the report added.

Furthermore, the World Bank warned that uncertainty remained high as rising food and fuel prices, ongoing supply chain disruptions, and labor market shortages exacerbate the danger of inflation expectations becoming de-anchored due to the lingering epidemic.

Another downside risk is that the region’s exports could drop more quickly than expected due to weakening global demand, supply problems, labor shortages, and higher shipping costs.

The impact of fresh COVID-19 outbreaks and disruptions on important infrastructure facilities such as ports poses further dangers.

Natural catastrophes and weather-related events, according to the World Bank, represent additional downside risk for many economies in the region, causing interruptions and damage.

The region is also at risk of more severe and long-term repercussions from the pandemic, particularly in nations that have been hit hardest by significant COVID-19 outbreaks and the collapse of global tourism and trade.

The World Bank stated that “lower potential growth reflects deteriorated human capital—amid school closures and chronic unemployment—as well as decreased investment.”

On the other hand, the unwinding of fiscal policy support in the Philippines, Indonesia, and Malaysia is projected to be gradual.

Global growth is expected to slow to 4.1 percent this year, down from a projected 5.5 percent in 2021, due to prolonged COVID-19 flare-ups, less fiscal support, and remaining supply bottlenecks.

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