The World Bank said Monday that Philippine economic growth would breach 6.5 percent in 2014 and 2015 as reconstruction spending would offset the adverse impact of typhoon Haiyan (local name: Yolanda) on the country's economy.
In its latest report, the Washington-based lender projected gross domestic product (GDP) growth for 2014 and 2015 to hit 6.6 percent and 6.9 percent, respectively. The government has targeted an increase of 6.5-7.5 percent this year.
"These projections crucially depend on the speed and scope of the reconstruction program. In the short-term, a well-designed and rapidly executed reconstruction program can boost economic growth beyond current projections," the World Bank said in its latest report.
The Philippine government launched recently a typhoon reconstruction program requiring 8 billion U.S. dollars. The World Bank said the speedy implementation of the Reconstruction Assistance on Yolanda would partially offset the decline in consumption and keep GDP growth strong.
Despite the onslaught of super typhoon Yolanda and a string of natural disasters throughout 2013, Philippine economic growth managed to accelerate to 7.2 percent last year. The World Bank said this is due to the country's "strong macroeconomic fundamentals."
This year, the Washington-based lender said risks such as slower global recovery, financial market volatilities following the tapering of the U.S. stimulus program and potential bubbles in the real estate sector could threaten Philippine economy. Slower reconstruction spending could also drag down growth this year by about 0.6 percentage point.
In the medium-term, the World Bank said the Philippines will be able to sustain a growth of above 6 percent if the government will be able to accelerate infrastructure spending. The Philippine government is targeting to double spending to 5 percent of GDP by 2016 from 2.5 percent.
The World Bank noted that infrastructure spending in the Philippines averaged only 2.1 percent of GDP in the last decade.
It also called on the Philippine government to put in place " structural reforms" to create more jobs and reduce poverty.
The Washington-based lender estimated that by 2016, around 12.4 million Filipinos would still be unemployed, underemployed or would have to work in the informal sector.