World Bank lowers Philippine economic outlook, forecasts 6.5% GDP growth

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Metro Manila (CNN Philippines, October 4) — The World Bank lowered its projection on Philippine economic growth on the back of weak electronic exports and lower agriculture output, rounding up similar forecasts by other international groups.

In its Philippines Economic Update (PEU), the global lender said that it expects the economy to grow by 6.5 percent in 2018. This is lower than its previous forecast of 6.8 percent gross domestic product (GDP) for the year.

It noted as growth risks the rising trade tension between the U.S. and China, and rising U.S. interest rates. On the domestic side, it flagged high inflation rates, which discourages private consumption and investments.

"To manage these risks, maintaining strong macroeconomic fundamentals is key. At the same time, accelerating structural reforms to improve investments in physical infrastructure and make better use of capital, labor, and technology to increase productivity remains a very good agenda for the Philippines," said World Bank Country Director Mara K. Warwick, in charge of Brunei, Malaysia and the Philippines.

Long-term initiatives suggested by the World Bank include regulatory reforms that promote market competition, improved trade and investment policies and regulations, and reducing rigidities and costs in the labor market.

It added that aiding the country's farming and fisheries sector is crucial to sustain high and inclusive economic growth.

The World Bank kept its 2019 forecast of 6.7 percent GDP, expecting growth to speed up due to the government's infrastructure expenditure program.

In a text message to CNN Philippines, Finance Secretary Carlos Dominguez said that the economic managers will discuss this report in the upcoming meeting of the Development Budget Coordination Council in October 16.

"We will evaluate the effects of the continuing rise of the U.S. Fed interest rates, ongoing trade disputes, and the increased level of fuel prices on the growing prospects of the Philippines economy and the economies of our major trading partners," Dominguez said.

Budget Secretary Benjamin Diokno on Tuesday said the government will not be able to meet its GDP target of 7 to 8 percent for 2018.

READ: Budget chief: PH to miss 2018 GDP target with high inflation

Diokno explained that to meet that target, the Philippines must get a GDP of 7.7 percent for the second half of the year.

"I find that it's going to be very difficult to get 7.7 (percent) considering we have elevated inflation," Diokno said.

CNN Philippines' business producer Jil Danielle Caro contributed to this report.