Philippine economy at risk of overheating, World Bank says

Photo via

By Audrey Morallo/ – Although the Philippine economy is one of the top three growth performers in the region, it faces several domestic risks such as overheating, higher inflation and climbing fiscal deficits, the World Bank warned on Monday.

In its Philippines Economic Update, the World Bank said that the risk of an overheating economy is increasing in an environment of growing fiscal spending and continued high credit growth.

“There are several domestic risks facing the Philippines, including higher inflation, an overheating of the economy and high fiscal deficits,” said the report.

Despite these risks, the medium-term economic outlook for the Philippines remains positive as the economy is expected to grow at an annual rate of 6.7 percent in 2018 and in 2019, the report said.

The report noted that the economy was growing at its potential rate and all major industries were operating at near full capacity.

“Moreover, unemployment reaching record lows in recent years, signaling less spare labor capacity, although underemployment remains high,” the report said.

Inflationary risks are rising due to external and domestic factors, the World Bank report said, with global commodity prices inching upward and the Philippine peso depreciating further in 2018.

The recently passed tax reform law will also contribute to an increase in domestic prices, the report said, as it could increase demand owing to higher worker take-home pay and raise transportation and energy prices due to the higher excise tax on fuel.

The World Bank also warned against possible disruption in exports and economic growth due to the rising tide of protectionism and a looming trade war between major economies abroad.

Although higher tariffs by the US are expected to have limited impact on Philippine exports, the report said: “Since the Philippines is connected to the global production chain, especially through its intermediate electronics export, an adverse trade policy against neighboring countries could eventually have an impact on the Philippines.”
Increasing policy uncertainty in global markets meanwhile is the key external risk facing the Philippine economy as a faster-than-expected normalization of policy rate by the US Federal Reserve could result in tighter financial conditions and heightened financial market volatility, the World Bank said.

“The medium-term economic growth outlook for the Philippines remains positive,” the Philippines Economic Update said.

It noted that the economy was currently growing at its potential, making investments in physical and human capital essential for the continuation of the growth trajectory.

The report also stressed that more could be done to create high-quality jobs and achieve a faster growth of real wages, two links it said were needed to achieve higher shared prosperity.

“Investing in the future means prioritizing investment in both physical infrastructure and human capital, such as in education, skills and health, will create better employment opportunities, especially for the poor,” it said.

Find more like this: Economy

  • Balangiga bells on the way home
  • Lea Salonga gets first Grammy nod with Broadway musical album
  • ‘Rice tariffication won’t solve Philippines’ inflation problem’
  • Celebrating Filipino Christmas traditions digitally
  • A Filipino favorite, Jollibee aims for international growth
  • Page 1 | 2 | 3 | 4 | 5 | 6 | 7


  • Lea Salonga gets first Grammy nod with Broadway musical album
  • 7 New Pinoy Movies To Stream Right Now
  • Filipino musical ‘Marco Polo’ ends successful preview run in Berlin
  • Pinoy graphic novel ‘Trese’ coming to Netflix
  • Singer Rico Puno dead at 65
  • MORE...


  • Showcase of PH culture, heritage
  • US and Philippines: Friends, Partners, and Allies
  • A Transgender Paradox, and Platform, in the Philippines
  • The Box That Brings Christmas to the Philippines
  • ‘Pinoy Aquaman’ swims 23 kilometers for peace in Mindanao
  • MORE...


  • Philippines island Boracay reopens for test run following huge cleanup
  • Philippines closes ‘cesspool’ tourist island of Boracay
  • Boracay Set to Ban Tourists for Six Months During Island ‘Rehabilitation’
  • Boracay: the good, bad and ugly sides to Philippine island for tourists
  • El Nido to impose daily visitor limits in 3 iconic tourist sites
  • MORE...


  • Pinoy gymnast Carlo Yulo earns historic qualification in worlds
  • Finding a way to bring the NBA to the Philippines
  • First Filipino table tennis Olympian Ian “Yanyan” Lariba dies at 23
  • Skateboarder Margielyn Didal wins 4th gold for Philippines
  • Asian Games gold medalist Hidilyn Diaz receives Air Force promotion
  • MORE...

    OFW News

  • DOLE suspends OFW deployment to Kuwait
  • Some OFWs turn to vlogging to beat loneliness, share life abroad
  • Overseas Filipino Bank to serve immigrants, workers
  • The ‘bagong bayani’ of the Philippines
  • Which countries pay OFWs the highest?
  • MORE...


  • Boracay Set to Ban Tourists for Six Months During Island ‘Rehabilitation’
  • Boracay: the good, bad and ugly sides to Philippine island for tourists
  • Luzon has greatest concentration of unique mammals
  • Mindanao plants 3M trees in an hour, challenges world record
  • Fighting for sharks in the Philippines
  • MORE...

    Pinoy Places
    and Faces