The World Bank has just raised the economic outlook of the Philippines by one percentage point this year due to better-than-expected growth performance in the third quarter. Based on the recent Philippine Economic Update, the World Bank is now projecting that the nation’s GDP may increase by 5.8 percent in 2021.
This new projected GDP is higher than earlier estimates which were pinned at around 4.3 percent in September, above the interagency Development Budget Coordination Committee’s downward adjusted 4.0 percent to 5.0 percent target.
As such, the economic impact and damage caused by the pandemic is expected to be less severe than expected, specially if the government intends to implement recovery strategies based on a phased reopening. Alongside continued progress with vaccinations, the bank also mentions that the domestic economy is expected to see further recover and reopening, which will in turn reintroduce market confidence, more dynamic economic activity, and an overall increase in the number of available jobs.
Public investment is expected to be the main driver in the medium-term as the government is expected to pursue its infrastructure investment agenda. However, private investment is seen to remain lukewarm due to subdued lending and market uncertainty.
Recently there was a notable global recovery as vaccination rates increased and the threat of the pandemic seemingly subsided. As such, household consumption and employment are projected to slowly pick up. However, the recent discovery of a new Covid-19 variant, dubbed Omicron, threatens to bring with it a new wave of infections.
Ndiame Diop, World Bank country director for the Philippines admitted that the new Omicron variant has certainly thrown a wrench in everyone’s predictions, adding a whole new level of uncertainty, but economic reopening, along with progress in vaccination, is still on track to improving domestic market confidence and investment.
