The Philippine economy is recovering, but the poor are struggling to climb out of the pandemic chasm
MANILA, Philippines — As the Philippine economy emerges from the pandemic, not everyone is feeling the recovery amid a storm of inflation, mounting public debt and other global uncertainties.
The World Bank said Wednesday (June 8) that the Philippine economy is expected to grow 5.7% in 2022, among the highest in Asia, but noted that external risks could shape the local economic landscape.
Ndiame Diop, World Bank country director for the Philippines, pointed to geopolitical uncertainty caused by Russia’s invasion of Ukraine, tighter global financial conditions and weakening growth in traditional trading partners of the Philippines as the United States and China as among the headwinds for the economy.
Diop added that the Philippines will need to reduce its budget deficit and debt to ensure fiscal sustainability.
The country’s debt is expected to cross the 13 trillion peso mark in 2022. President Rodrigo Duterte’s economic team led by Finance Secretary Carlos Dominguez III has already proposed a fiscal consolidation plan to President-elect Ferdinand Marcos Jr.
“In the context of shrinking fiscal space, authorities can encourage public-private partnerships to support improvements in the country’s infrastructure assuming that the financial risks to the government are managed and that the quality of services to citizens is guaranteed. “, said Diop.
Kevin Chua, senior economist at the World Bank, said the country’s debt was still manageable so far, with most of it long-term, domestic and denominated in pesos.
In May, inflation climbed to 5.4% and analysts warned it had yet to peak. Chua noted that rising prices are holding back consumption and deepening poverty.
The World Bank has estimated that the direct effects of price changes on poverty show that a 10% increase in the world grain price is expected to increase the poverty rate by 1 percentage point, pushing an additional 1.1 million Filipinos into poverty. poverty.
A 10% increase in energy prices, meanwhile, is expected to push the poverty rate up by 0.3 percentage points, which equates to an additional 329,000 Filipinos in poverty.
Chua also noted that smaller businesses have a higher rate of closures, indicating an uneven economic recovery. Sectors like tourism and storage have yet to return to pre-pandemic levels of production and income.
“Authorities should use all available policy tools to fight inflation, including monetary measures to prevent the unanchoring of inflation expectations, and supply-side measures such as importing and lowering tariffs and non-tariff barriers for important commodities to help increase domestic supply as needed, and increased support for agricultural production through extension services, seeds and fertilizers” , Chua said. – Rappler.com