Metro Manila (CNN Philippines) — Increased election spending and lower oil prices will lift Philippine economic growth this year until 2018, the World Bank said.
According to the lender’s East Asia and Pacific Economic Update released Monday, the Philippine economy will grow 6.4 percent in 2016 and 6.2 percent in 2017 and 2018, a significant improvement from the 5.8 percent notched last year.
Campaign spending for the local and national elections this May is expected to drive private consumption, while the drop in oil prices should keep inflation under control, it said.
Cheaper fuel is a double-edged sword, though, as it is dragging down many Middle Eastern economies where about half of all overseas Filipino workers are employed. The World Bank warned that remittances could take a hit should the trend of low oil prices persist.
Nevertheless, the Philippines is still poised to grow much faster than the region. East Asia and the Pacific is forecast to grow at an average of 5.7 percent this year and next, before inching up to 5.8 percent in 2018.
“Among the large developing ASEAN (Association of Southeast Asian Nations) economies, the Philippines and Vietnam enjoy the strongest growth prospects…” the report read.
Trickle-down growth?
While the economy has outperformed in the last six years under President Benigno S. Aquino III, the World Bank said there is still much left to do to ensure the growth translates to a better quality of life for Filipinos.
The conditional cash transfer (CCT) program — the Aquino administration’s main poverty-mitigation initiative — has had some impact. “Extreme poverty is estimated to have decreased from 10.6 percent in 2012 to 9% in 2014,” it said. If the cash transfers to the poorest of the poor continue, extreme poverty could fall lower to 6.8% by 2018.
However, the CCT has been mostly felt in the non-agricultural sector, it qualified. High rates of poverty persist for households dependent on agriculture. This has been worsened by the onset of El Niño. As the drought decimated the crops, it took along with it about 935,000 jobs in the sector.
The World Bank urged the government to keep on pushing the CCT program and other poverty reduction initiatives. “Trends in recent years point to the beginnings of a more inclusive growth pattern, which needs to be sustained over a longer period before the poor can feel the impact of higher growth and better governance in their daily lives.”
Urgent business
The lender also recognized the achievements of the Aquino administration in bringing down the deficit, promoting transparency and funneling more resources to infrastructure development and social services.
It emphasized the need to institutionalize these reforms before Aquino steps down in June to allow the country’s economic trajectory to continue.
One key reform is the promotion of competition in sectors such as shipping and telecommunications — key not only to doing business but also to job creation in the Philippines. Others include the creation of a system to secure property rights, the simplifying of business regulations, the continued investment in infrastructure, and the pursuit of peace in Mindanao.
“The final stretch of the current administration presents an opportunity to accelerate the economic reform agenda and lay out a practical approach to tackle it for the next administration,” the World Bank said.
