The World Bank on Tuesday said the Philippine economy is likely to grow 4.2 percent next year due to the full recovery of public spending and exports.
In its latest Philippines Quarterly Update, the Washington-based lender said the country’s gross domestic product (GDP) is projected to grow 4.2 percent next year from an earlier forecast of 5 percent.
GDP refers to the total value of final goods and services produced in the country.
“Higher 2012 growth hinges on improvement in exports, acceleration of PPP projects and private sector investment, and a full recovery of public spending with possibly a medium-size fiscal stimulus,” the lender said.
For this year, the economy is projected to grow 3.7 percent from an earlier forecast of 4.2 percent.
“Our projection hinges on the successful implementation of the government’s disbursement acceleration program and an acceleration in private consumption and investment, which have begun to grow faster in the last quarter. In addition, lower growth in the fourth quarter of 2010 should provide the added base effect boost. Significant downside risks largely stem from the weaker external environment and less than satisfactory public spending,” the World Bank report said.
The Aquino administration earlier announced a P72-billion disbursement acceleration plan to ensure that the budgeted items are spent by year end to boost the economy.
The economy grew by 3.6 percent in the first three quarters of the year because of weak exports and government spending.
The World Bank also said that the growth prospects in the medium to long-term could be sustained at above 5 percent, provided that reforms to address structural bottlenecks are implemented
Growth in East Asia is projected to slow down from 8.1 percent in 2011 to 7.7 percent next year. While a number of countries are expected to enact fiscal stimuli to buoy growth, these are likely to be limited given narrower fiscal space.
Nevertheless, the World Bank report noted that the Philippines is relatively well-positioned to weather shocks emanating from the current global turmoil because of its strong macroeconomic fundamentals, regulatory reforms and prudential measures instituted following past crises and slowdowns.
Overseas Filipino workers’ large remittance inflows have insulated the country from external imbalances. The financial sector’s conservative stance throughout the preceding decade has helped to ensure healthy balance sheets. The corporate sector also exhibited no systemic vulnerabilities.