MANILA - The economy is expected to be robust at above 6-percent growth until President Aquino steps down in 2016, according to the latest report released by the World Bank.
In its Global Economic Prospects 2014 report, the Washington-based lender said the Philippines’s economy was expected to grow by 6.9 percent in 2013; 6.5 percent in 2014; 7.1 percent in 2015; and 6.5 percent in 2016.
The reconstruction and rehabilitation efforts in the wake of Supertyphoon Yolanda is expected to spur this growth and even boost regional growth in the East Asia and the Pacific region, particularly in 2015.
“Regional output growth [excluding China] is estimated to settle around 5.5 percent by 2016 as external demand solidifies and adjustment comes to completion. A temporary acceleration of regional growth [excluding China] in 2015 to 5.7 percent partly reflects reconstruction efforts in the Philippines,” the report stated.
The World Bank said that while Yolanda caused a “large humanitarian impact” on areas it affected and “cut deeply into activity in the central islands,” the impact on overall economic growth would be limited.
The report stated that Yolanda would cause a 0.9-percent decline in economic growth in the fourth quarter of 2013 and, in turn, cause a 0.2-percentage-point decline in full-year economic growth compared to pre-Yolanda estimates.
This means that if the full-year economic growth in 2013 was expected to be at 7.1 percent prior to Yolanda, this would be reduced to 6.9 percent because of the damage caused by the super typhoon.
The National Economic and Development Authority (Neda) has said it expected as much. Days after Yolanda hit Central Philippines, Socioeconomic Planning Secretary Arsenio Balisacan said the fourth-quarter growth in 2013 could slow to around 4.1 percent.
Balisacan added that the full-year gross domestic product (GDP) growth for 2013 could be reduced by 0.3 to 0.8 percentage points, lowering growth estimates to around 6.5 percent to 7 percent.
The Neda chief also said that prior to the onset of calamities, the Philippine economy was expected to grow by 7.3 percent for 2013, after registering a 7.6-percent growth in the first half of the year.
The impact of the typhoon on the economy was still very minimal considering that GDP growth is a measure of production and does not take into account personal suffering and loss of lives. It must also be noted that the Philippine economy largely runs on the steam provided by consumption spending. So any increase in consumption, like the replacement of damaged property or public infrastructure, can provide a boost to economic growth.
“In the Philippines, there is an increasing need to undertake structural reforms and rebalance the economy from its excessive dependence on consumption, while at the same time prioritizing investment, to rebuild the typhoon-stricken portions of the economy. Careful management of fiscal levers may be requested to direct spending toward the affected areas and away from over- heating sectors elsewhere,” the World Bank said.
On the global economy, World Bank Group President Jim Yong Kim said: “Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery.
“The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets,” Kim added.
The bank said the firming of growth in developing countries is being bolstered by an acceleration in high-income countries and continued strong growth in China.
However, growth prospects remain vulnerable to headwinds from rising global interest rates and potential volatility in capital flows, as the United States Federal Reserve Bank begins withdrawing its massive monetary stimulus.