MANILA, Philippines - The World Bank on Monday said it slightly lowered its 2014 economic growth forecast for the Philippines, as the effects of super typhoon "Yolanda" are expected to continue dampening growth.
In a statement, the World Bank said the Philippines' gross domestic product (GDP) will grow by 6.6% , slightly lower than its pre-Yolanda forecast of 6.7%. This is at the lower end of the government's target of 6.5-7.5% this year.
On the other hand, the World Bank raised its 2015 GDP forecast for the Philippines to 6.9%, from an earlier forecast of 6.8%.
"(Growth) depend on the speed and scope of the reconstruction program. The key challenge of the reconstruction process is to develop and enforce explicit standards for ‘building back better’—for safe and resilient buildings and infrastructure... An action-oriented, coalition-supported program on generating more and better jobs is needed," the World Bank said.
It noted that addressing the jobs challenge and ensuring sustainable reconstruction in affected areas will help Yolanda survivors get back on their feet much quicker, and mitigate future risks from calamities.
World Bank country director Motoo Konishi said the $8 billion reconstruction program launched by the government will reduce Yolanda's negative impact, as well as allow the Philippines to rebuild better schools, homes, and other infrastructure.
"Over the coming years, a comprehensive agenda to support the revival of agriculture and manufacturing will further strengthen the country’s resilience to calamities... Reforms to secure property rights, enhance competition, simplify regulations, and increase investments in health, education, and infrastructure will make this happen," Konishi said.
Konishi said the disruption to economic activity in Yolanda-hit areas will drag growth through lower consumption. However, a speedy implementation of the Reconstruction Assistance on Yolanda (RAY) program is expected to partially offset the decline in consumption.
On the other hand, the downside risks to Philippines' growth could come from a slower global recovery and the end of quantitative easing in the United States, the World Bank said.
"Slower growth in high income countries and in China would translate into lower external demand given the country’s strong linkages to the global supply chain for electronic parts. A slower Chinese economy could also stall the recovery of Philippine exports," it said.
World Bank senior economist for the Philippines Karl Kendrick Chua said the end of quantitative easing in the US would lead to higher borrowing costs, lower capital inflows, and a decline in asset prices in the Philippines.
"While highly leveraged businesses and households may be affected, the overall impact on the Philippines is expected to be manageable, given its strong current account surplus and high international reserves, flexible exchange rate system, and sustainable deficits and debt levels," Chua said.