By Corina Oliquino
FilAm Star Correspondent
MANILA — The World Bank in its Philippines Economic Update report released last October 10, downgraded its 2019 growth outlook for the country to 5.8 percent from the earlier 6.4 percent citing weakening global economic growth, the delayed passage of the 2019 national budget and the trade tensions between China and the US.
The revised outlook is below the Government’s 6.0 to 7.0 percent downwardly adjusted growth target.
“The downward revision considered the impact of the recent global development (on) the Philippine economy, as well as the sharp slowdown in investments growth in the first half of 2019,” World Bank Senior Economist Rong Qian said in a report by The Manila Times.
“While the government is trying to accelerate public investment to compensate for the underspending in the first half of the year, (there are) still implementation challenges that might prevent a full catch-up,” she added.
On its official report, the World Bank notes the Philippines’ outlook will recover 6.1 percent in 2020 and 2021, respectively by fast tracking the “implementation of recently approved game-changing reforms (which) would help to achieve inclusive growth. In the long-term, promoting competition to generate quality jobs will enhance the impact of growth on poverty reduction in the Philippines.”
The country’s gross domestic product (GDP) also slowed to 5.5 percent in the first half of 2019 due to the four-and-a-half-month delay in the passage of the 2019 national budget which affected state spending.
“Although we are seeing signs that this budget is disbursed more quickly in the last months, the challenge is a lot of agencies have not started the procurement process. And as you know, the procurement process in the Philippines is rather long,” Rong said in a briefing.
“Another challenge is the absorptive capacity of the private sector. The budget delay caused some accumulation of projects and now that it has been passed, they all go to the market and at the same time the private sector, especially the construction sector in some LGUs don’t have the absorptive capacity,” she said.
According to World Bank, the implementation of previous tax-policy reforms led to robust revenue, resulting in a lower than programmed fiscal deficit for the first half of 2019.
It added that improving labor market conditions and sustained growth in real household incomes also led to progress in poverty reduction.
“Poverty reduction is expected to continue based on the current economic outlook. The country’s poverty rate measured by the World Bank middle-income poverty line of US$3.20/day is estimated to have declined from 26 percent in 2015 to 20.8 percent in 2019, and further declining to 19.7 percent in 2020, and 18.7 percent in 2021,” the Report read.
In its Report, World Bank noted that in the short-term, the country can resume public investment and fast-tracking the effective implementation of “game-changing reforms” such as the Ease of Doing Business Law, the Rice Tariffication Law, the creation of a foundational ID system, and other such transformational policy changes would be critical to set the country to a higher path toward accelerating inclusive growth.
“While in the long-term, promoting competition to foster quality job creation will enhance the impact of economic growth on poverty reduction and shared prosperity,” the Report added.
Meanwhile, Rong said fiscal policy will remain supportive of growth alongside the recovery of public investment.
“Monetary policy is also expected to be accommodative as inflation pressure diminishes,” Rong said.
“To sustain the public investment momentum, timely passage of the 2020 budget would be important. Similarly, swift passage of the corporate tax and fiscal incentives reform will help to resolve uncertainties in the private sector,” she said.
Moreover, the Report also stressed the importance of competition in the country to enable the entry of more players and pave the way for the creation of more jobs by “eliminating restrictions on foreign and domestic investors to help level the playing field, by addressing unclear or restrictive regulations in infrastructure sectors and professional services to create more competitive conditions, by minimizing the scope of controlled prices to incentivize firms to compete, by lessening the involvement of state-owned enterprises and other operations in typically competitive markets to promote a more effective use of public funds and by streamlining burdensome administrative procedures for businesses to make it easy to enter the market.”