The World Bank said Tuesday it remains optimistic about the Philippine economy, keeping its forecast of 5.9 percent average annual growth from 2024 to 2026.
“Economic growth in the Philippines is projected to average 5.9 percent per year over the medium term anchored on robust domestic demand, strong services growth and improved trade,” the Washington-based lender said in the June 2024 edition of its Philippines Economic Update.
This forecast remains unchanged from the April 2024 report published in the East Asia and Pacific Economic Update.
It projected an economic growth of 5.8 percent for the Philippines this year, lower than the government’s target range of 6 percent to 7 percent.
The Philippine economy is projected to expand by 5.9 percent annually in 2025 to 2026.
“The positive outlook over the medium-term hinges on containing inflation and transitioning toward a more accommodative monetary policy, which will support private domestic demand,” the World Bank said.
“Despite ongoing fiscal consolidation, public investment will likely be above 5 percent of GDP and remain supportive of growth,” it said.
Meanwhile, export demand is projected to strengthen over the forecast horizon, led by robust services exports.
The World Bank said the risks to the growth outlook for the Philippines remain tilted to the downside. “Externally, risks stem from heightened geopolitical tensions, further fragmentation in global trade policy, and weaker-than-expected growth in China. An intensification of geopolitical tensions could lead to higher energy prices, which would reduce households’ disposable incomes,” it said.
“Further fragmentation of trade policies and increased trade protectionism would weigh on trade and could lead to an increase in commodity prices globally,” it added.
Domestically, the World Bank said a prolonged episode of El Niño and a stronger than expected La Niña could lead to damages to farm output which could place upward pressure on food prices.
“The threat of persistently high inflation could lead to a reduction in private consumption growth. In addition, it could lead to further delays in monetary policy normalization, dampening growth prospects,” it said.
“Lastly, delays in passing key reforms for fiscal consolidation could dampen the medium-term outlook,” it added.
The World Bank projected an average inflation of 3.6 percent this year, or within the government’s target of 2 to 4 percent. “Inflation returned to within the target range as food and energy price increases softened,” it said.
“However, prices of staple commodities, such as rice, remain elevated and disproportionately impact poor households,” it said.
