World Bank: 'PH among strongest performers in the region'

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(File photo)

Metro Manila (CNN Philippines) — During its economic briefing on Monday morning (October 5), the World Bank highlighted ways for growth to benefit small businesses in the Philippine economy.

“The Philippines can ensure a more inclusive growth path by accelerating reforms to secure property rights, promote more competition, and simplify regulations to trigger more private investments by firms of all sizes, while sustainably ramping up public investments in infrastructure, education, health, and social protection,” said World Bank Country Director Motoo Konishi in a statement.

The latest Philippine Economic Update noted the need for the government to simplify business regulations and lower the costs for micro, small, and medium enterprises (MSMEs) — especially for small exporters. The cost of starting and doing business ranges from P21,000 P45,000, eating up around 17 to 36 percent of per capita income.

Small business owners also spend a considerable amount of time moving from one agency to another and waiting in line to process their documents, resulting in around P100 billion in productivity losses yearly. Around 60,000 jobs are also lost to reduced productivity every year.

Reducing these costs would make growth more inclusive, as MSMEs account for around 99 percent of businesses in the country.

The institution also called for greater and faster public investment. Government spending — particularly in infrastructure — was slow in 2015. From the first half of 2014 to the first six months of this year, the national budget increased by 18.5 percent — but government expenditures only increased by 8.5 percent. This dampened the country's average growth, and weakened the scope and impact of public goods and services that could have benefited the poor.

Tempered expectations

The World Bank cut its growth estimate for the Philippines this year to 5.8 percent from 6.5 percent in January, amid government underspending, slow exports, and the initial impact of El Niño on agriculture growth. But the Bank warned that a stronger El Niño and weaker exports can pull down growth significantly. In 2016, growth is expected to accelerate to 6.4 percent before tempering to 6.2 percent in 2017.

Poverty also fell by around 2 percentage points from 2012 to 2014. But the Bank added that poverty reduction depends heavily on food prices. It suggested that government should work to keep rice supply adequate and manage price spikes as the El Niño is expected to intensify.

'Strong fundamentals'

The Bank also shared economic developments in the East Asia and Pacific Region. Amid instability in China's exports and financial markets, and the timing of an interest rate hike by the United States' Federal Reserve, countries in the region are expected to grow at around 6.5 percent in 2015 — down from 6.8 percent last year. Still, these economies are seen to account for around 40% of global growth in 2015.

“Developing East Asia’s growth is expected to slow because of China’s economic rebalancing and the pace of the expected normalization of U.S. policy interest rates,” said Sudhir Shetty, chief economist of the World Bank’s East Asia and Pacific Region, in a statement. “These factors could generate financial volatility in the short term, but are necessary adjustments for sustainable growth in the long term.”

However, the Bank remained positive with the Philippines.

"The Philippines is among the strongest performers in the region, bucking the trend, because of strong fundamentals," it said in a statement.

CNN Philippines' Miro Capili contributed to this report.