The Philippines needs to intensify steps to bolster community resilience against the effects of climate change and extreme weather to minimize economic disruption and sustain inclusive growth, according to the World Bank’s Philippines Economic Update (PEU), released today.
In addition, the government needs to improve the efficiency, transparency, and inclusive use of public resources in climate adaptation, mitigation, response, and rehabilitation, the report states.
"The current El Niño phenomenon exemplifies the severe disruptions that extreme weather events, intensified by climate change, can cause,” said World Bank Country Director for Brunei, Malaysia, the Philippines, and Thailand Ndiamé Diop. “These disruptions include impacts on educational services, reductions in farm yields, and constraints on water and electricity supplies. Proactive measures to bolster community resilience against such climatic challenges are crucial and can significantly mitigate their adverse effects on the country's growth outlook."
The Philippine economy is forecasted to accelerate to 5.8% growth in 2024 from 5.5% last year and to 5.9% in 2025. Growth is expected to be driven by strong household consumption, sustained strength in the services sector, and improved trade stemming from a rebound in global demand for goods and the continued recovery of services exports such as tourism.
The growth forecast is based on expectations that inflation will ease, thus strengthening household purchasing power. Growth is also expected to benefit from the government's commitment to shore up public investment with plans averaging 5.7% of GDP from 2024 to 2026, including 124 new flagship infrastructure projects.
However, higher-than-expected inflation; extreme weather; global geopolitical tensions; tighter-than-expected financial conditions; and a possible sharper slowdown in China pose risks to this outlook. A prolonged El Niño event or possibly a La Niña could strain domestic food supply and trigger an increase in inflation.
“To manage inflation,” said World Bank Senior Economist Ralph Van Doorn,“the continued implementation of non-monetary strategies is essential," including efforts "to optimize supply and demand management" and "to secure timely and adequate imports of staple food items.” He added that “the government needs to continue providing social assistance to vulnerable groups who are disproportionately affected by high food inflation.”
In September 2023,the government launched the El Niño National Action Plan focusing on building resilience in water agriculture electricity health,and public safety.To effectively manage impacts of El Niño,a climate pattern produced by warming oceans,the government has implemented strategic measures including financial assistance for rice farmers,fuel subsidies for farmers,and fishers,and allocations for insurance claims,and credit assistance for affected farmers,and fishers.
The report also emphasizes enhancing revenue collection as vital for sustainably financing development priorities.Achieving fiscal targets by 2028 relies on more robust tax revenues.Additional revenue efforts could focus on broadening tax base,rationalizing tax incentives,strengthening tax administration,and improving collection efficiency.Fiscal consolidation could help preserve confidence,increase private investment productivity,and lead sustainable increases in public investment infrastructure health education.