The Philippine economy may post an even slower growth this year as inflation continues to increase, according to the World Bank (WB).
In its latest East Asia and the Pacific (EAP) Economic Update for April 2023, the country’s gross domestic product (GDP) is expected to post a growth of only 5.6 percent this year, lower than the 5.8 percent forecast it made in October 2022.
The WB said among the larger economies of the region, most, including Indonesia, the Philippines, and Vietnam, are anticipated to grow more modestly in 2023 than in 2022.
“Most major economies of East Asia and the Pacific have come through the difficulties of the pandemic but must now navigate a changed global landscape,” World Bank East Asia and Pacific Vice President Manuela V. Ferro said.
“To regain momentum, there is work left to do to boost innovation, productivity, and to set the foundations for a greener recovery,” she added.
The WB report stated that the recovery in the region has been uneven across sectors, even as information and communication technology, finance and agriculture have experienced relatively strong growth.
However, the report stated that the growth in transportation, accommodation and catering sectors in the Philippines and Thailand as well as construction and real estate in Malaysia and Philippines, were still below pre-pandemic levels.
The report noted the consumer price inflation (CPI) also increased in most EAP economies on the back of “rising energy and food prices as well as idiosyncratic factors.”
“Core and nominal CPI inflation have surpassed central banks’ target ranges in most major EAP economies. While inflation has recently peaked in several economies, it continues to rise in the Philippines and Vietnam, and remains high in Lao PDR, Mongolia, and Myanmar,” the report stated.
The WB said most countries in the EAP region have seen two decades of higher and more stable growth than economies in other regions. The result is a striking decline in poverty and, in the last decade, also a decline in inequality.
However, the WB said, the catch-up to the per capita income levels of advanced economies has stalled in recent years as productivity growth and the pace of structural reforms have slowed.
Addressing the significant “reform gap,” especially in services, could magnify the impact of the digital revolution and boost productivity in sectors from retail and finance to education and health.
“De-globalization, aging, and climate change are casting a shadow over the growth prospects of a region that has thrived through trade and is growing old fast,” said WB East Asia and Pacific Chief Economist Aaditya Mattoo. “However, promoting trade, addressing population dynamics, and enhancing climate resilience could strengthen growth.”
The WB said economies of the region must also cope with three important challenges as policymakers act to sustain and accelerate economic growth in the aftermath of Covid-19.
Rising tensions between major trading partners will affect trade, investment, and technology flows across the region.
The rapid aging of the major economies of East and Southeast Asia heralds a new set of challenges and risks with implications for economic growth, fiscal balances, and health.
Finally, the region is particularly exposed to climate risks, in part due to the high density of population and economic activity along its coasts.
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