MANILA, April 1 (Xinhua) -- Amid lingering global and local uncertainties, the World Bank (WB) said in a report released on Monday that the Philippine economy is poised to grow at 6.4 percent in 2019 and 6.5 percent in 2020 and 2021.
The new estimates are lower than the previous WB forecasts of 6.5 percent growth in 2019 and 6.6 percent in 2020 released in January this year, owing to several factors including 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 its Philippines Economic Update (PEU).
"The country's growth outlook remains positive," WB country director for Brunei, Malaysia, the Philippines and Thailand Mara Warwick said. "Higher private consumption due to lower inflation, steady growth of remittances, and election spending will fuel growth this year."
"Growth in public investment will be tempered in the first half of 2019 but is expected to recover in the second half of the year," Warwick added.
The PEU said growth of the Philippine economy has historically been driven by consumption, with households contributing more than two-thirds of aggregate expenditures.
Annual private consumption growth declined from 5.9 percent in 2017 to 5.6 percent in 2018 due to high inflation, the PEU says.
However, the report said it is expected to rebound to 5.9 percent in 2019 and 6.0 percent in 2020 due to declining inflation and the continued job generation in the economy.
The report said remittances are expected to remain steady as new employment opportunities for Filipinos become available in countries like Japan, Germany, and Poland, further fueling consumption.
The PEU, however, flagged several risks that can affect the Philippines' overall growth prospects, among them the delay in the approval of the 2019 budget and a looming drought.
Under a reenacted budget, the report said the government can not implement new programs and projects, thus affecting public investment. The El Nino phenomenon that is expected to cause several months of dry spell might reduce farm output and raise food prices, the report further said.
The report also highlighted the risks posed by external factors. It also mentioned potential challenges stemming from a strengthening U.S. dollar, and hikes in U.S. interest rates that could raise borrowing costs for the country's infrastructure projects.
"In the short term, key priorities for sustaining the Philippines' rapid and more inclusive growth include prudently managing fiscal and current account balances and preserving consumer and business confidence," World Bank senior economist Rong Qian said.
"As the government ramps up spending to implement its inclusive growth agenda, it would need complementary reforms to increase revenue and ensure that the country's finances are sound and sustainable," Rong added.
In the long term, the report stressed the need for the country to focus on raising investments in human capital, including people's health, nutrition, education and skills, to speed up inclusive growth or growth that benefits the poor and most vulnerable.
"The Philippines needs to address the high rates of malnutrition among children, improve learning, and the quality of healthcare, to unleash the full productive potential of Filipinos," said Gabriel Demombynes, program leader for Human Development for Brunei, Malaysia, the Philippines and Thailand.
"The country needs to focus on these challenges while undertaking reforms for improving the country's capacity to create more high-paying jobs and speed up poverty reduction," Demombynes added.