MANILA, Philippines - The World Bank forecasts the Philippine economy to grow by at least 5% this year, buoyed by more investments in the mining sector, the services sector outperforming itself, sustained private consumption, and sustained growth of the business process outsourcing (BPO) industry.
In its quarterly report released yesterday, the global financial institution said increasing mineral prices serve as an incentive to fasttrack investment and increase production in the mining sector.
“The strong performance of the services sector in the first quarter is expected to remain robust throughout the year. The agriculture sector is projected to continue being a net contributor to growth,” Eric Le Borgne, World Bank senior economist, said in the report.
Le Borgne added that the prospects on the supply side is favorable, with manufacturing and construction projected to benefit from the end of the trade disruption linked to Japan’s post-disaster reconstruction, and the relative calming of the political unrest in the Middle East and Northern Africa (MENA) nations.
Net exports are projected to recover due to a combination of a technical rebound in exports combined with a potential boost in exports of goods and services (including labor exports) to Japan, as Philippine companies and workers contribute to the reconstruction of affected areas.
It added that private consumption will to be buoyed by strong wage growth and employment among relatively well paid and formal sectors.
Likewise, the optimism in the Philippine economy was anchored on the November 2010 upgrading of the country’s sovereign foreign currency rating by global credit watchers Standard and Poor’s and Moody’s.
The challenge, however, is sustaining the momentum of reform for achieving inclusive or broad-based growth that benefits the poor, Le Borgue said.
Reform measures already achieved include improving the transparency of the public sector budget and of public financial management to improve governance, and launching an ambitious Public-Private Partnership (PPP) program to address infrastructure bottlenecks as well as help foster the development of inclusive sectors such as tourism.
The World Bank report said that regional airport development combined with partial ‘open sky’ agreements would enable international tourists to reach tourism hot spots in the Philippines directly, thus generating jobs for the poor as well as business opportunities from micro and small enterprises.
In terms of boosting and protecting human capital of the poor and vulnerable, the government has reshuffled social protection resources away from wasteful and ineffective programs, towards the well-targeted conditional cash transfer program. By end-2011, the 4Ps is budgeted to cover 60% of the poor.
“To ensure inclusive growth, a steady focus on reforms will be needed but so will additional resources,” the report noted. “To improve revenue mobilization, the strategy of the government has been to first increase tax compliance through enhanced tax and customs administration. Ultimately, however, tax policy reforms outlined in the Philippine Development Plan would also be needed to complement the compliance-enhancing administrative measures.”