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MANILA - The World Bank has cut this year’s economic growth forecast for the Philippines largely because of the crisis in the euro zone, China’s slowing growth and volatile oil prices.
In the latest Global Economic Prospects, the Washington-based lender said the Philippines’ gross domestic product is likely to grow four percent in 2012, down from an earlier forecast of 4.2 percent.
This is despite the Philippine economy’s surprise 6.4 percent growth in the first quarter, which made it Southeast Asia’s fastest growing, and Asia’s second-highest next to China.
The Bank’s latest forecast is also below the five to six percent full-year target of the government, as well as the lender's 7.6 percent average forecast fo East Asia and the Pacific.
For 2013 and 2014, Bank forecast Philippine GDP growth at five percent.
"Uncertainty regarding oil prices, and still relatively weak demand from the high-income world, coupled with slow growth in China are projected to ease GDP gains in East Asia and Pacific to 7.6 percent in 2012, before rebounding to 8.1 percent in 2013, and to 7.9 in 2014," the report said.
China is projected to grow by 8.2 percent this year, down from last year's 9.2 percent.
“Global capital market and investor sentiment are likely to remain volatile over the medium term – making economic policy setting difficult. In this environment, developing countries should focus on productivity-enhancing reforms and infrastructure investment instead of reacting to day-to-day changes in the international environment,” Hans Timmer, director of Development Prospects at the Bank said.
Andrew Burns, manager of Global Macroeconomics and lead author of the report, said developing countries need to move to reduce vulnerabilities by lowering short-term debt levels, cutting budget deficits and returning to a more neutral monetary policy stance.
"Doing so will provide them with more leeway to loosen policy, should global conditions take a sharp turn for the worse,” Burns said.
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