MANILA, Philippines – The Philippine economy is projected to post a 6.8 percent growth in 2010 and a medium-term path of 5 to 5.4 percent in 2011 and 2012 grounded in remittance-supported household spending and further government support for infrastructure development.
In its latest Global Economic Prospects (GEP) 2011, the World Bank (WB) noted that economies of East Asia including the Philippines are poised to continue enjoying further years of solid growth albeit at a moderate pace as the world economy moves from a post-crisis bounce-back phase toward slower, but still steady growth this year.
The report said that the overseas Filipino worker (OFW) remittances estimated to reach US$21.3 billion in 2010 will continue to play a critical role.
"GDP growth has been stronger than expected, reflective of rapid recovery and election-related spending amidst a strong external position which has led to a sovereign credit rating upgrade in November by Standard and Poor's," said Eric Le Borgne, WB senior economist for the Philippines during the launch of the GEP 2011.
Le Borgne said that growth is expected to normalize to at least 5 percent in 2011 and 5.4 percent in 2012.
"Crucial to this projection is the assumption that strong investor confidence, which manifested in strong private investment this year and in business as well as consumer sentiment surveys, would be sustained by government's efforts to step-up reforms in the areas of governance and in improving the overall investment climate," he said.
Le Borgne said that Philippine exports dominated by electronics and semiconductors, would expose to the risks of a slowdown in demand from developed countries. Nevertheless, he explained that the outlook within the industry remains strong.
"Forward looking indicators in the electronics and semiconductor sector are positive, albeit slightly down in the past quarter," said Le Borgne.
"On the services side, the business process outsourcing (BPO) industry is booming and despite concerns that a sharp and pronounced appreciation of the peso would have, the sector's short-term growth prospects are favorable."
Food price shocks, Le Borgne said, poses a risk, but rice supply constraints is not expected in the near term in the country given decent palay production in the latter part of 2010 and large stockpiles at the National Food Authority.
On the fiscal side, Le Borgne expects some unwinding of the crisis-related fiscal easing to happen in 2011 as part of the government's medium-term fiscal consolidation plan that aims to reduce the overall fiscal deficit to 2 percent of GDP by 2013.