The World Bank now projects the Philippine economy to grow at 6.8% in 2016, rather than the 6.4% forecast released in October (World Bank Philippines Economic Update October 2016). Growth in the third quarter of 2016 was higher than expected with accelerating investment and private consumption growth, the World Bank said, following strong growth performance of the Philippines economy in 1H16 which was driven by the government’s pre-election stimulus.
“Recent economic trends illustrate the high confidence among investors and consumers, and provide the foundation for a more optimistic outlook for the remainder of 2016 and for 2017,” said Birgit Hansl, World Bank Lead Economist for the Philippines. “The economy’s strong performance in October and November, and continued policy commitment to an increase in public infrastructure spending are expected to carry the economy’s growth momentum over to 2017 to 2018.”
As growth momentum shifts away from advanced economies back towards emerging markets and developing economies, Philippine exports are expected to grow in 2017 at a similar rate as in 2015 to 2016. The World Bank has revised its growth projection for the Philippine economy in 2017 upwards to 6.9%, compared with an October forecast of 6.2%. In 2018, the economy is expected to expand at 7%.
Growth in capital investment is projected to remain the Philippine economy’s primary growth engine. Despite an expected increase in interest rates in 2017, monetary policy is expected to remain supportive of growth, resulting in continued credit expansion.
The implementation of large infrastructure investments is projected to lead to significant spillover effects into consumption growth next year. Robust credit growth to households and healthy remittances is also expected to fuel consumption.