The World Bank (WB) expects the Philippine economy to grow by 3.5 percent this year and follow through with 3.8 percent next year, according to forecasts in its Global Economic Prospects 2010 report released Friday.
The WB also estimated the country’s gross domestic product (GDP) to have grown by one percent last year, the slowest so far since 2006 due to the global financial crisis.
The report studied the impact of the global financial crisis on the growth prospects of developing countries. It concluded that the consequences would be felt over the next five to seven years, cutting the growth trajectory of developing countries by 0.2 up to 0.7 percentage points annually. Over the long term, potential output could be reduced by 3.4 up to 8 percent compared to levels reached before the crisis happened, it said.
In the case of the Philippines, the economy was escalating from an average growth of 4.2 percent from 1995-2005 to 5.3 percent in 2006 before reaching a peak of 7.1 percent in 2007.
In 2008, when the crisis ravaged many economies around the world, the country still managed to grow at 3.8 percent.
“The depth of the recession and the relative weakness of the expected recovery suggest that significant spare capacity, high unemployment, and weak inflationary pressures will continue to characterize both high-income and developing countries for some time,†the WB said in the report.
“For middle-income countries with access to international financial markets and better developed domestic markets, the main impact is likely to be through the increased cost of borrowing,†it added. The Philippines is considered a low middle-income country by WB standards.
It said in the report that developing countries could face a total financing gap of as much as $ 315 billion this year. It said this liquidity crunch would also make it more expensive to secure financing and thus undermine economic growth and output over the next five to seven years.
Because of China, the East Asia and the Pacific region is emerging strongest around the world with 8.1 percent GDP growth expected this year and 8.2 percent next year.
“Looking forward, the stabilization of international financial markets and renewed capital inflows, coupled with a strong inventory cycle, particularly among the newly industrialized economies in the region, are expected to boost growth in 2010,†the WB said. It added that moderate advances in world trade growth and continuing excess manufacturing capacity would drag economic performance in 2011. - PNA
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