MANILA - The Philippine economy may grow 5.7 percent in 2022 and 5.6 percent in 2023 and 2024, the World Bank's Philippines Economic Update released Wednesday showed.

"The growth outlook for the Philippines remains positive but subject to downside risks," World Bank senior economist Kevin Chua said in a virtual briefing.

Despite growth being slower than the government's target, the Philippine economy will still be one of the top performers in the region, Chua said.

The Development Budget Coordination Committee (DBCC) earlier narrowed the Philippine economic growth target for the year to between 7 to 8 percent from the initial forecast of 7 to 9 percent.

The World Bank report flagged several risks to growth including inflation that could affect household spending. Inflation ballooned to 5.4 percent in May, beyond the 2 to 4 percent target range set by the Bangko Sentral ng Pilipinas.

Estimates showed that a 10 percent increase in global prices of cereals could raise poverty headcount by 1 percentage point, bringing an additional 1.1 million Filipinos to poverty, the World Bank said.

Meanwhile, an increase in energy prices could raise the poverty headcount by 0.3 percentage points equivalent to an added 329,000 Filipinos in poverty, it added.

• BSP raises inflation forecast to 4.6 percent in 2022
• 'Aggressive' rate hike by BSP possible if inflation stays high: economist

Other headwinds that could temper growth include the ongoing war between Russia and Ukraine that pushes oil and global commodity prices up, the abrupt tightening of policy rates in the US, the slowdown in China that could hit the global supply chain, and the emergence of new COVID-19 variants, Chua said.

"Yes, it [debt] will be a drag for growth, this is the reason why we’re recommending fiscal consolidation," Chua said.

But Chua clarified that the 63.5 percent debt-to-GDP ratio in the first quarter remains manageable since the majority is domestic borrowings in peso denomination and with longer payment terms.

He, however, recommended fiscal discipline and improved revenue collections.

The Department of Finance proposed wider taxes and VAT as well as the deferment of personal income tax reductions to generate new funds for debt payments.

President-elect Ferdinand Bongbong Marcos Jr, however, said any additional tax should be properly scrutinized so as not to further burden cash-strapped Filipinos recovering from the impact of the pandemic.

• Marcos Jr says proposed deferment of fuel excise taxes needs deeper study
• DOF pushing new taxes, wider VAT, halt to income-tax deductions to pay high debt

The World Bank, meanwhile, cut its global economic growth forecast to 2.9 percent from its earlier projection of 4.1 percent in January, citing the continued impact of Russia's invasion of Ukraine and the COVID-19 pandemic.

SUSTAINED ECONOMIC GROWTH

Meanwhile, World Bank Country Director for Brunei, Malaysia, Philippine Ndiamé Diop commended the Philippines' 8.3 percent growth in the first quarter which reversed the 3.8 percent contraction in the same period in 2021.

He said continued growth would be fueled by improving domestic environment, greater mobility, reopening of borders, sustained public investments and wider resumption of economic and social activities including face-to-face classes, among others.

“Continuity of reforms in the last six years promoting greater competition and attracting foreign investments will further boost the country’s growth outlook in the coming years,” Diop said.

“In the context of narrowing fiscal space, the authorities can encourage public-private partnerships to sustain improvements in the country’s infrastructure assuming financial risks to the government are managed and the quality of services for the citizens are secured," he added.

• PH econ managers narrow 2022 growth forecast due to Ukraine crisis, rising rates

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