The World Bank said on Monday the Philippines’s young population is one of the reasons the Wa-shington-based lender is optimistic about the country’s economic growth in the next three years.
In the latest East Asia and the Pacific report, the World Bank
maintained its growth forecast for the Philippine economy at 6.5 percent in 2015 and 2016, and 6.3 percent in 2017.
While these are below the 7-percent growth target of the government, the World Bank said this still places the Philippines in the ranks of high-growth economies in the region.
“Unlike many other countries in the region, [it] has this demographic structure which is much better than the others. A lot of other countries [in the region] are facing aging populations, the Philippines is facing a young work force, which finds itself in [a] highly advantageous region. So it’s one of those elements why we are saying things are looking good for the Philippines going forward,” World Bank lead economist Rogier van den Brink said in a briefing on Monday.
Data obtained from the Philippine Statistics Authority (PSA) showed that the 2010 Census of Population and Housing pegged the median age of Filipinos at 23.4 years old. This means that half of the population is aged below 23.4 year old and half is aged above 23.4 years old.
The PSA also said in 2010, a total of 38.5 million Filipinos belonged to the school-age population, or those aged 5 to 24. This represents 41.8 percent of the 92.1 million estimated number of Filipinos in 2010.
Aside from its young population, the World Bank said low oil prices and the expected 2.6 percentage-point increase in consumption demand in the first half of 2016, due to the May 2016 presidential polls, will support and boost economic growth.
The World Bank estimated that the Philippines may see a 1.1-percent increase in gross domestic product (GDP) growth and 1.3-percent growth in trade balance due to low oil prices in 2015. This is one of the highest growth increases for both GDP and trade balance in the region on account of low pump prices.
The Washington-based lender further said efforts of the Aquino administration to curb graft and corruption resulted in the decline in government spending at the start of the term of the President.
But Van den Brink said this increased the efficiency in the use of financial resources, which contributed to higher social spending that improved the lives of the poor. This resulted in more inclusive growth.
Van den Brink said before 2012, every percentage increase in GDP only translated to around 0.24-percent reduction in poverty. However, after 2012, every percent increase in GDP translated to a 0.9-percent decline in poverty incidence.
“The first round in 2013 actually put this number at 2 [percent]; so that was very high. Every increase in GDP by 1 percent reduced poverty by 2 percent. That was fantastic. But then we saw 2014, when we saw the impact of [Supertyphoon] Yolanda and we saw the artificially high rice price, while international rice prices were going down, the country was restricting its imports which drove rice prices up. And you know rice is a good that everybody has to eat,” Van den Brink said.
To sustain the country’s economic gains, the World Bank reiterated its recommendations in January on improving the taxes and broadening the base of taxpayers.
The World Bank supported the view of the Asian Development Bank (ADB) and Economic Planning Secretary Arsenio M. Balisacan, who urged the government to increase excise taxes, especially at this time when oil prices are very low.
Van den Brink also said lowering income and corporate taxes could help broaden the tax base, as well as revising the real property tax to aid the government’s revenue collection efforts.
Meanwhile, developing economies of East Asia are projected to grow by an average of 6.7 percent in 2015 and 2016, slightly down from 6.9 percent in 2014.
China’s growth, however, is expected to moderate to around 7 percent in the next two years compared with 7.4 percent in 2014. Growth in the rest of developing East Asia is expected to rise by half-a-percentage point, to 5.1 percent this year, largely driven by domestic demand.
Robust domestic demand will be supported by upbeat consumer sentiment and falling oil prices, particularly in the large Southeast Asian economies.
The Washington-based lender said low global oil prices will benefit most developing countries in East Asia, especially Cambodia, Lao PDR, the Philippines and Thailand, as well as Pacific island countries.
But the region’s net fuel exporters, including Malaysia and Papua New Guinea, will see slower growth and lower government revenues. In Indonesia the net impact on growth will depend on the decline in its coal and gas exports.