MANILA - Acknowledging that the Philippines was economically more resilient than earlier anticipated, the World Bank has overhauled its forecast of a 0.5-percent contraction of the country’s economy this year and now projects growth of 1.4 percent.
The World Bank likewise revised its outlook on the Philippines for 2010, from economic growth of only 2.4 percent to 3.1 percent.
Eric Le Borgne, senior economist at the World Bank’s Manila office, said remittances and the government's stimulus programs spelled the difference for its old and new assumptions.
There was an earlier consensus that remittances to developing countries like the Philippines would sharply decline this year because of layoffs in recession-afflicted countries, mostly the industrialized ones.
However, Le Borgne said remittances to the Philippines remained strong because deployment of new workers to alternative labor markets, including the Middle East, remained high. Newly deployed Filipinos outnumbered those who lost their jobs.
Earlier, the World Bank said remittances sent to the Philippines would fall by 4 percent from the $16.4 billion recorded last year. Now, it sees a 4-percent increase in the money sent by Filipinos working abroad.
The revised economic growth forecast of the World Bank came after the announcement that the Philippine economy grew by 1.5 percent in the first half of 2009. The Arroyo administration said this kept the economy on track to grow between 0.8 and 1.8 percent for the full year.
"The Philippines avoided a recession, thanks to timely fiscal and monetary stimuli combined with larger than projected inflows of remittances," the World Bank said in its latest Philippine Quarterly Report released Wednesday.
Nonetheless, the World Bank said the Philippines was facing challenges to make its economic growth meaningful.
Ulrich Lachler, lead economist of the World Bank Manila office, said that while the country was performing better than others in terms of growth, poverty incidence in the Philippines was relatively high.
"Growth was not widely shared. While the economy was growing, poverty incidence actually increased," Lachler said, citing 2006 poverty incidence data showing that 33 million Filipinos lived below the poverty line.
Poverty incidence is expected to have further risen this year due to the ill-effects of the global economic downturn on the Philippines. Layoffs especially in electronics manufacturing sector are seen to have dragged household incomes down.
Lachler said measures to address long-standing problems of uninviting business climate, inadequate infrastructure, poor access to education, and weak tax collection should already be put in place.
The bank said the Philippines should attract more investments to generate additional employment, which in turn could help reduce poverty.
The government should also improve tax collection, particularly by having Congress pass proposed revenue-enhancement bills, to afford higher spending for infrastructure and education.
These include bills increasing taxes on cigarettes and alcohol and proposed legislation lifting tax- and duty-free incentives enjoyed by some businesses.
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