MANILA — The World Bank on Wednesday raised its growth outlook for the Philippine economy this year and noted that the country outperformed its peers in the region in the first quarter.
According to the World Bank's Philippine Economic Update June 2023 Edition, the country's gross domestic product (GDP) growth could hit 6 percent this year, higher than its earlier estimates of 5.7 percent.
This year's GDP growth outlook is also lower than the 7.6 percent in 2022.
"Growth is still expected to moderate in 2023, albeit to a lesser degree than we predicted in January. This is because elevated inflation and tight policy environment will weigh on domestic demand while the slowdown in global growth will weigh on external demand," said World Bank Country Director for the Philippines, Malaysia, Thailand and Brunei Ndiamé Diop said.
He noted that the Philippine economy outperformed its peers in the first quarter growing by 6.4 percent.
The government growth target for 2023 is at 6 to 7 percent.
Strong domestic demand will drive this year's growth, World Bank Senior Economist Ralph Van Doorn said.
"We expect that private assumption growth will be supported by improved employment, steady remittances and better consumer sentiment and also the expected decline in the headline inflation," Van Doorn said.
Pent-up demand, remittances and improved employment have also been supporting domestic activity despite elevated inflation, he said.
Although inflation eased for the 4th straight month to 6.1 percent in May, it remains above the government target of 2 to 4 percent.
Among the key drivers to continued and sustainable growth include managing inflation, pursuing revenue-enhancing policies and public spending efficiency, promoting investments and pursuing clean energy transition, Van Doorn said.
The World Bank expected the inflation in the Philippines and globally to slow down, however, there are risks to both inflation and growth including the potential impact of El Nino, continued political tensions and further monetary policy tightening, among others.
Bangko Sentral ng Pilipinas Governor Felipe Medalla said inflation could revert to within the government's 2 to 4 percent target later this year.