Thursday, 21 October 2010 11:58
Now is a good time to pursue structural reforms in the Philippine economy, the World Bank (WB) said in its latest economic update where it further raised the country’s growth forecast for the year to 6.2 percent.
“The inauguration of the Aquino government in July 2010 and the global economic recovery offer Philippines a window of opportunity to embark on structural reforms to improve its development outcomes,” the WB said in the East Asia and Pacific Economic Update 2010 released on Tuesday in Tokyo.
“The new government has initiated reforms to improve public finances and to strengthen the investment climate for more inclusive growth. These are commendable and should be pursued steadfastly and vigorously,” it added.
In the report, the WB raised anew its forecasts on the country’s growth.
Last June, the bank said it expected the country’s gross domestic product (GDP) to grow by 4.4 percent in 2010 and by four percent in 2011.
The latest economic update has adjusted these growth forecasts to 6.2 percent for this year and five percent next year and in 2012.
The forecasts assume that no material revisions would be made in the estimated 7.9 percent growth reported in the first half.
The WB said structural reforms were needed to raise the country’s growth momentum beyond the four to five percent trajectory in the medium term.
Average growth in East Asia is forecast at 8.4 percent for 2010, with developing countries in the region expected to grow at 6.7 percent.
Next year, the region’s growth is expected at 6.8 percent, where developing countries would be logging economic expansion on the order of 5.1 percent.
Aside from the Philippines, developing countries in East Asia include China, Indonesia, Malaysia, Thailand, Vietnam, Cambodia, Fiji, Lao PDR, Mongolia, Papua New Guinea and the Solomon Islands.
East Asia and the Pacific as a region includes these developing countries plus the newly-industrialized economies of Hong Kong, South Korea, Singapore and Taiwan.
For the Philippines, progress would hinge on the rationalization of tax incentives and increase of excise tax rates, according to the WB.
“While improving the efficiency of public spending is a welcome move, increasing the level of public spending is also needed to improve the stock of human and physical capital. This would entail some tax policy reforms to ensure a higher and sustained revenue base that would enable the government to embark on more ambitious reforms,” it said in the report.
It added that three factors were crucial in fostering the investment climate needed to get the Aquino administration’s proposed public-private partnership (PPP) going: addressing longstanding constraints in doing business, ensuring a level playing field and reducing corruption. (Lara Jane M. Climaco-PNA)
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