By Luis Leoncio
The economy sustaining its strong growth path of above six percent would result in the poverty rate to decline to 22.9 percent in 2018, the World Bank (WB) said in its October 2017 edition of the East Asia and Pacific Economic Update.
WB said the pace of poverty reduction may drop slightly in the face of slightly lower overall growth, but poverty is expected to continue to fall as the economy continues its structural transformation.
Increased spending in infrastructure would generate construction jobs that are expected to boost poverty reduction, according to the report.
Official poverty figures based on the most recent household survey data from 2015 show an acceleration of poverty reduction.
Sustained economic growth since 2015 makes it likely that the poverty rate has continued to decline, the report said.
Based on the lower middle-income class poverty line of $3.20 per day, poverty in 2015 is estimated at 27 percent and projected to be at 24.2 percent by the end of the year implying that 1 million Filipinos “have exited poverty each year since 2015,” the report said.
Contributing factors to poverty reduction include a conditional cash transfer program that reaches one-fifth of the population and the ongoing transition of workers out of agriculture, the report added.
WB said In 2017, the economy is projected to expand at a slightly slower pace than 2016, at 6.6 percent.
The delay in the anticipated push of the planned government infrastructure program has been contributing to the moderation of fixed capital formation growth, softening the growth prospect for the year, it added.
The report said the medium-term growth outlook remains positive, and is expected to be anchored in growth in the Philippines’ main trading partners which would lead to higher external demand, while imports would remain elevated due to necessary imports of intermediate and capital goods, including for the infrastructure program, it said.
The WB noted that as the public infrastructure program gains traction, capital outlays and construction activities are expected to rise.
Consumption growth is expected to remain firm contingent on sustained remittances and expanding credit contributing to improving income levels, the report added.
It added that local elections in 2019 will likely boost domestic activities as early as the latter half of 2018.
Growth in 2018 and 2019 is projected at 6.7 percent, the WB said.
Growth was likely to expand at a slightly slower pace in 2017–18, due in part to slower-than-expected implementation of public investment projects, the report said.
Nevertheless, the Philippines is expected to continue to be the fastest growing economy in the Associated of Southeast Asian Nations (Asean).
The Philippines will continue to be one of the fastest-growing economies in East Asia and the Pacific in the next two years despite political noise, WB said.
The WB revised its forecast growth for the Philippine economy for 2017 to 6.6 percent from 6.9 percent, partly due to slower-than-expected implementation of public investment projects.
“Regarding the politics in the Philippines on how it has affected growth rates, we don’t in our analysis see any impact of this as yet. The Philippine economy will be one of the fastest growing in this region and certainly among the largest economies,” Sudhir Shetty, WB chief economist for the East Asia and Pacific region, said.
Shetty said the local economy is forecast to grow slower, as the implementation of public investment projects is “taking a bit longer than we expected.”
He cited the need for the Philippines, along with Thailand, Cambodia and Lao PDR, where public infrastructure programs have been expanding, to prioritize measures to improve public investment management.
“What is equally important is not just making the plans to increase these investments but also paying attention to how these projects are selected to ensuring that they are implemented on time, that they are implemented according to the budget,” Shetty said.
Shetty added it is also crucial for the Philippines to look for ways to raise more revenues in a bid to support its ambitious plans to expand public infrastructure over a period of time..
He believed that the tax reform program “is very important for the fiscal prospects and the growth prospects of the Philippines.”
WB expects the country’s economic growth is even expected to outpace that of China, which is forecast to accelerate by 6.4 percent and 6.3 percent in 2018 and 2019, respectively.
China’s gradual rebalancing away from investment and towards domestic consumption is expected to continue.