MANILA, Philippines — The World Bank lowered its Philippine growth forecasts Thursday to 6.4 percent this year and 6.7 percent next year but says the country remains one of East Asia's fastest growing economies.
World Bank officials said the revision reflects the economy's sluggish takeoff in the first quarter of 2014 after the devastation of Typhoon Haiyan, slower government spending in the second quarter and tightening of monetary policy in the first seven months.
The projection contained in an updated report on the Philippine economy is down from the previous 6.6 percent forecast for this year and 6.9 percent for next year.
But the government is on the right track, with recent data suggesting sustained high growth has begun to cause significant reductions in poverty, bank officials said.
Some 2.5 million Filipinos were lifted out of poverty in 2013 in a break from "many years of slow poverty reduction," said Rogier van den Brink, the bank's top economist for the Philippines. The proportion of people living in poverty in 2013 was 24.9 percent, down 3 percentage points from 2012.
In the 12 months through April, the economy also created 1.7 million jobs, but there is a need for higher quality employment, he said.
Karl Kendrich Chua, the bank's senior economist for the Philippines, said the country can sustain high growth by accelerating reforms and increasing investments in infrastructure and in health and education.
The World Bank estimates that the country needs to spend an additional 5 percent of GDP on health and education to raise labor productivity and competitiveness of Filipino workers on top of the government's planned doubling of infrastructure spending to 5 percent of GDP.
The government has already doubled spending on social services and injected more funds into infrastructure. World Bank economists said sustaining those efforts will close the remaining gaps brought about by decades of lagging public investment.
The Philippines' spending on infrastructure as well as machines and equipment has been declining since the 1970s and is below its neighbors. It also spends 30-50 percent less on infrastructure, health and education.
Chua said the country's tax system must be made simpler and more equitable, with the tax burden and cost of compliance reduced for small businesses and wage earners.
He said the government has successfully raised tax revenue equivalent to 1.2 percent of GDP in the last three years through the tobacco and alcohol "sin tax" reform and improved tax administration.
"Accelerating the reform momentum would help the country yield additional tax revenues to further expand growth that can benefit more poor Filipinos," he said.