THE World Bank on Tuesday said it expects inflation in the Philippines to fall within the government’s 2 to 4 percent target next year after the November data showed the inflation rate further easing to 4.1 percent.
The multilateral lender also said the Philippines’ gross domestic product will grow by an average of 5.8 percent in 2024, higher than its 5.6 percent growth projection for 2023.
“[The] Inflation reading of 4.1 percent is very good news. And we see that food inflation has fallen but also non-food (inflation). It’s important that both are falling and are closer now to the central bank’s 2 to 4 percent target,” said World Bank Senior Economist Ralph Van Doorn in a briefing.
As price pressures cool, Van Doorn believes the economy could get a stronger boost from household consumption this holiday season and up to 2024.
“We expect that growth will be led by private consumption as inflation is expected to be lower and supported by remittances,” he said.
But Van Doorn also cited various risks that could again trigger higher food and energy prices such as escalating geopolitical tensions, trade restrictions on agricultural products as well as El Niño and other weather disturbances.
“So we still have to wait and see to what extent there could still be global shocks. El Niño could still lead to higher domestic food inflation and there still could be risks that increased food prices or maybe fuel prices could lead to second round effects domestically,” he noted.
To mitigate these risks, the World Bank urged the Philippine government to continue with ‘its strategy of using both monetary and non-monetary measures to increase the supply of imports, lower the tariffs of key commodities and assure better supply and demand management for food items’, said Van Doorn.
The World Bank also highlighted the need for more pro-investment reforms and their speedy implementation to stimulate economic growth in the medium term.
Van Doorn noted that the Philippines is still lagging compared to its neighbors in terms of investments.
“The investment rate of the Philippines is well below that of its neighboring countries even though it has really ramped up over the last seven years,” he said.
Van Doorn also put a premium on the kind of investments that would not only increase the Philippines’ capital stock but would also lead to greater productivity.
“In that context, a very important reform is the Public Services Act which is expected to create more competition in key public service sectors which will lead to an increase in the quality of the service delivered, for example, in transport sectors and telecoms,” he said.
He added: “We have seen evidence from other countries, those sectors where there’s better service quality, more competition, lead to more productivity in the sectors that are using those services, for example, manufacturing.” (ABS-CBN News)
