THE World Bank Group is forecasting strong growth for the Philippines in 2015 and in the next couple of years, even as it warns of serious challenges ahead for developing economies and downgrades the outlook for the global economy.
In its flagship report “Global Economic Prospects” (GEP) released June 10, the financial institution predicts Philippine gross domestic product (GDP) to grow by 6.5 percent this year and the next, and to expand 6.3 percent in 2017.
This despite the World Bank Group’s downward revision of global growth rate to 2.8 percent in 2015, slightly lower than anticipated in January.
Global growth is expected to pick up to 3.2 percent in 2016 to 2017, broadly in line with its previous forecasts.
But the report also stresses major difficulties for developing countries, with the emergence of important shifts in global trends.
“Developing countries face a series of tough challenges in 2015, including the looming prospect of higher borrowing costs as they adapt to a new era of low prices for oil and other key commodities, resulting in a fourth consecutive year of disappointing economic growth this year,” said the report.
World Bank Group president Jim Yong Kim said, “Developing countries were an engine of global growth following the financial crisis, but now they face a more difficult economic environment.”
He added that while the recovery in high-income countries is expected to gather momentum, “a broad-based slowdown appears to be underway in developing countries this year.”
High-income countries are expected to grow by two percent in 2015 and 2.3 percent in 2016 to 2017. Among major economies, growth in the Euro area and Japan is picking up, and the United
States should continue to expand at a robust pace despite recent setbacks, while the slowdown in China is proceeding as anticipated in January.
Compared with 2014, growth in developing countries is expected to slow to 4.4 percent in 2015, a 0.4 percentage downward revision from January, as they contend with commodity prices, the stronger dollar, and tightening financial conditions.
However, the pace is seen to pick up momentum and rise to 5.2 percent in 2016, and 5.4 percent in 2017.
In the East Asia and Pacific region to which the Philippines belongs, growth is expected to ease to 6.7 percent in 2015 and remain stable over the next two years.
Among member countries of the Association of Southeast Asian Nations (Asean), the GEP predicts Indonesia to moderate to 4.7 percent in 2015, before picking up to 5.5 percent in 2016 to 2017, supported by a recovery of investment and stronger exports.
In Thailand, real GDP growth is projected at 3.5 percent in 2015, with exports picking up slightly. Growth is expected to strengthen in 2016 and 2017 to four percent, as commodity prices remain low and the recovery in high-income economies strengthens.
In Malaysia, growth will slow to 4.7 percent in 2015, as low oil prices dampen investment in the oil and gas sector and credit growth continues to slow. An acceleration to five percent is expected in 2016 to 2017, as some normalization occurs.
In Vietnam, GDP growth is forecast at six percent in 2015, rising gradually to 6.5 percent in 2017 on the back of continued strong performance of the manufacturing sector, exports, and foreign investment.
As for the Philippines, growth is projected to remain strong, “benefitting from a recovery in Japan and from low fuel prices,” said the report.
There are many risks to the overall outlook, the biggest being the expected rise in US interest rates.
The World Bank Group believes this “could ignite market volatility and reduce capital flows to emerging markets by up to 1.8 percentage points of GDP.”
To counter the risks, they suggest investing in people’s education and health, improve the business environment, and create jobs through upgrades in infrastructure.
“These kinds of investments will help hundreds of millions of people lift themselves out of poverty,” it added. Philexport News and Features