The Philippine Online Chronicles

The World Bank has further downgraded its growth forecast for the Philippines for 2011 and 2012, citing weak public spending and sagging global demand during the three previous quarters.

Philippine growth in terms of gross domestic product (GDP) might hit a “moderate” 3.7 percent by yearend with an increase to 4.2 percent next year in line with regional forecasts, the bank said in its Philippines Quarterly Update (PQU) released yesterday.

In October, it trimmed its growth forecast to 4.5 percent in 2011 and 5 percent in 2012, down from its previous forecasts of 5 percent and 5.4 percent respectively.

The bank said the latest outlook factored in the third quarter GDP data showing January to September growth at only 3.6 percent, which is way below the government’s revised 4.5 to 5.5 percent target for 2011.

World Bank economist Karl Kendrick Chua said that achieving 5 percent growth would be possible if reforms were undertaken by the government, such as raising revenues for higher spending on infrastructure and other sectors as well as reducing the cost of doing business.

“A stronger structural underpinning would allow the country to deal with shocks more effectively, achieve more inclusive growth and reduce poverty at a faster rate,” Chua said in a news report.

HSBC issued a similar downgraded outlook, saying the Philippine economy will grow by only 3.6 percent this year from its earlier forecast of 4.3 percent.

“The main reason for the downward revision is the weak global economic backdrop. We see that global economic headwinds will persist in 2012,” Leif Eskesen, a Singapore-based HSBC economist, said in a BusinessWorld report.

Eskesen noted that Philippine growth will be the second slowest in the group of five Association of Southeast Asian Nations (ASEAN) that includes Indonesia, Malaysia, Thailand and Vietnam. Thailand economy is seen to grow at the slowest rate of 1.7 percent for 2011.

Both the World Bank and HSBC, however, acknowledge that the country will weather external shocks due to large remittance inflows from overseas Filipino workers.

Reacting to the latest forecast, National Economic and Development Authority (NEDA) assistant director-general Ruperto Majuca said the Aquino government is still confident of achieving higher growth rates.

“Those forecasts are low; 4 percent growth is comfortably reachable for 2011, and so is more than 5 percent for 2012,” Majuca said.