THE WORLD BANK has downgraded its 2012 outlook for the Philippines as well as for the region, citing euro zone jitters, higher oil prices and a growth slowdown in China.
In its Global Economic Prospects 2012 report, the multilateral institution projected that the Philippine economy would grow by only 4% this year, down from the 4.2% forecast in January.
The reduced outlook is also below the government’s 5-6% target. It was not immediately known if the new 2012 forecast took into account the first quarter’s surprisingly strong 6.4% growth.
For 2013, the World Bank expects growth to pick up to 5%, unchanged from January. This rate will likely be sustained the following year, it added.
The said the slower growth will be reflective of the East Asia and Pacific region.
Though financial concerns lessened in Europe during the first four months of the year, they revived in May and are likely to cause “a serious deterioration of conditions,” the report noted.
“In such a scenario, growth in East Asia and the Pacific could slow by as much as two to four percentage points due to reduced import demand, tighter international capital conditions and increased precautionary savings abroad and within the region,” the World Bank said.
It warned that countries heavily reliant on tourism and remittances like the Philippines could be hit hard. The Philippines, it noted, is currently the largest recipient of worker remittances in the region, with such funds accounting for 10.7% of gross domestic product (GDP).
Meanwhile, China’s “more rapid than expected slowdown poses an external risk for the rest of the region” in the form of reduced demand for exports, with commodity dependent countries especially threatened.
Oil price uncertainties, relatively weak demand from high-income countries and China’s slow growth would likely limit GDP gains in the region to 7.6% this year. The outlook was 8.1% for next year and 7.9% in 2014.
Sought for comment, University of the Philippines economist Benjamin E. Diokno said he agreed with the World Bank.
“I agree by and large with the WB assessment but with slightly different assessment of risks,” Mr. Diokno said in a text message. “[I] think the global slowdown could be more serious than originally expected.”
“[T]here could be a temporary break from rising oil prices owing to slowing demand” but “there appears to be no real, permanent solution to the European problem.”
A National Economic and Development Authority (NEDA) official, however, called the World Bank’s outlook “definitely very low.”
Ruperto P. Majuca, NEDA assistant director general, said planners expect to “attain the higher end of the growth assumption of 5-6% with a considerable probability of exceeding it,” adding that next year’s expansion was forecast at 6-8% or higher.
“The government has laid the foundation for broad-based growth so that even if the rest of the world are experiencing economic difficulties, the Philippine economy is an exemption and acting like a star player,” Mr. Majuca claimed.
Strengthened domestic demand and upward momentum in tourism, business process outsourcing, exports and investments will in a way insulate the Philippines, he said.
Source: BusinessWorld, 12 June 2012
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