World Bank downgrades forecast for Philippine economic growth

Nov 22, 2011, 5:57 GMT

Manila - The World Bank on Tuesday downgraded its forecast for the Philippines' economic growth for this year and 2012 due to increased global uncertainties and a slowdown in investments.

In its East Asia and Pacific Economic Update report, the World Bank said the Philippine economy was projected to grow 4.2 per cent in 2011, instead of its initial forecast of 5 per cent.

The bank also revised to 4.8 per cent its growth forecast for 2012, from 5.4 per cent.

The report said that while the Philippines 'is well-positioned to absorb any new financial shock' from the current fiscal turmoil, prospects for growth were weaker.

'The Philippines is benefiting from relative political stability and improved fiscal position, but key downside risks to growth remain - increased global uncertainties and a slowdown in investments,' the report said.

The bank noted that the Philippines was lagging behind its neighbours in attracting foreign direct investments, which reached 838 million dollars in the first half of the year or just 1 per cent of the country's gross domestic product.

The report said policymakers need to ensure that the Philippines continue to improve competitiveness, while cushioning the economy from adverse external shocks.

'To strengthen the country's resiliency to external shocks, the government needs to accelerate public spending,' it said.

'Raising more revenues through improved tax administration and policy reforms will enable the government to meet its priority spending targets, especially in infrastructure and human capital investment,' it added.

The bank said a government programme to mobilize private sector resources for investments in such key sectors as infrastructure, education and social protection was a 'step in the right direction.'