World Bank raises PH growth outlook to 6%

The Philippine economy is expected to grow at a much faster rate this year than initially estimated despite higher inflation, the World Bank said. In its latest Global Economic Prospects report released on Wednesday, June 7, the Washington-based lender raised its 2023 gross domestic product (GDP) outlook for the Philippines to six percent.

The latest growth projection is 0.6 percentage points higher compared to its 5.4 percent estimate last January. Moreover, it is above the 5.6 percent outlook stated in its April East Asia and the Pacific Economic Update.

Although the World Bank’s new GDP projection now falls within the government’s targeted range of six percent to seven percent, it still sits at the lower end of the goal band.

The World Bank’s more positive outlook for the Philippines also coincides with its projection that inflation in the country would remain above the Bangko Sentral ng Pilipinas’ target range of two percent to four percent.

“While both core and headline inflation are expected to ease through 2023, in the near-term headline inflation is likely to remain above central bank targets in some countries (Mongolia, Philippines),” World Bank said.

This is due to the delayed passthrough of increases in global commodity prices and domestic supply shocks, it added.

Meanwhile, the World Bank maintained the Philippines’ GDP forecast at 5.9 percent for 2024 and 2025.

In the first quarter, the Philippines registered its slowest economic growth since the government eased quarantine restrictions as persistently high inflation and global headwinds took a toll on post-pandemic gains.

The country’s GDP grew by 6.4 percent from January to March, a sharp slowdown from eight percent a year earlier. It also weakened from 7.1 percent recorded in the final three months of 2022.

Despite the slowdown, President Marcos’ economic managers were still confident that the country was still on track to meet its growth target this year.

In April, the inter-agency Development Budget Coordination Committee (DBCC) kept its GDP target of six percent to seven percent for this year and 6.5 percent to eight percent for 2024 to 2028.

DBCC said the GDP forecast already factored in risks posed by geopolitical and trade tensions, possible global economic slowdown, as well as weather disturbances in the country.

The DBCC, however, adjusted upward its inflation outlook for 2023 on the back of “persisting high prices of food, energy, and transport costs.”

According to the inter-agency body tasked to set the government’s macroeconomic assumptions, inflation may average around five percent to seven percent, higher than the previous assumption of 2.5 percent to 4.5 percent.

But the DBCC expects inflation to return to the target range of two percent to four percent between 2024 and 2028.