Updated 16:58 PM PHT Mon, October 3, 2016
Metro Manila (CNN Philippines) — The World Bank is keeping its growth forecasts for the Philippine economy, as it expects strong fundamentals to smooth over any uncertainty that comes with a new administration.
The gross domestic product (GDP) — a key indicator of a nation's economic health — is expected to grow 6.4% this year, then 6.2% in 2017 and 2018.
If the administration of President Rodrigo Duterte firms up its reform agenda, the economy could grow even faster than the 6.2% forecast in the coming years, World Bank lead economist Birgit Hansl said in a press conference.
In Asia, the Philippines was the best-performing economy in the first six months of 2016, with GDP growth at 6.9%. It bested China and Vietnam, which grew at just 6.7% and 5.6%, respectively.
The World Bank welcomed the Duterte government's 10-point economic agenda, which continues the largely successful policies of the previous administration under Benigno Aquino III. Some of its priorities include simplifying the tax system, improving the ease of doing business, and loosening foreign ownership restrictions.
"But as some policy details are still being discussed, some businesses might remain cautious," Hansl said, adding that investors will likely wait for the release of the Philippine Development Plan for 2016 to 2022.
The economist said it was inevitable that a change of government could lead to policy shifts. But investors should take comfort in the solid, robust economic fundamentals of the Philippine economy.
Consumer and business optimism are rising, and this shows in the healthy levels of domestic consumption and investment, Hansl said. The government is boosting public spending and keeping interest rates low to help support the economy. As a result, unemployment and poverty, while still high, have been gradually declining, she noted.
The World Bank noted that the Philippines's unemployment rate fell to 5.4% this July, an 11-year low.
However, the World Bank was concerned about the quality of jobs, pointing to the persistent underemployment in the country. About 17.3% of working Filipinos want longer hours or an additional job to supplement their income.
The Duterte administration is considering an increase in the minimum wage and a ban on contractual work in a bid to raise incomes. But business groups have opposed these measures, warning they could limit, not expand, job opportunities for Filipinos.
"We recognize the need for companies to maintain flexibility in hiring, but we also see lots of abuse in contractualization," World Bank research analyst Kevin Cruz said in the news conference.
He encouraged the government to continue its policy dialogue with business and labor leaders to arrive at a "win-win solution."
One of President Duterte's campaign promises was to scrap "endo" or "end-of-contract" practices, where workers are hired for five months at a time, so employers can avoid extending benefits and security of tenure.
Businesses have defended the practice, saying that industries such as retail only need more workers during peak shopping months such as Christmas, while sectors such as construction, film, and animation also operate on a project basis.
The Department of Trade and Industry earlier proposed a compromise, with manpower agencies giving workers regular employment and the benefits that come with it, such as 13th month pay, social security, and health insurance. Companies can then tap these workers for their short-term needs.
The Department of Labor and Employment is scheduled to consult workers' groups this month.