In its Philippine Economic Update released on Thursday, the
The lender's latest estimates fell below the government's growth targets of between 6.5 percent and 7.5 percent for 2014 and between 7 percent and 8 percent for 2015.
The revision reflects the slow start of the economy in the first quarter of 2014 given the effects of Supertyphoon Yolanda, lower government spending in the second quarter, and monetary policy tightening in the first seven months of the year, the Bank said.
Among the fastest
Despite the slight downgrade, growth for 2014 is still projected to be one of the fastest among the major economies in the
In a press briefing,
"In the last four years, the government has doubled spending on social services and has provided more money for developing the country's infrastructure. Sustaining these efforts will close the remaining gaps brought about by decades of lagging public investment," he said.
Gaps in spending, fiscal management
Explaining where the gaps are, Chua noted that the country's spending on roads, bridges, ports, airports, as well as machines and equipment has generally been declining since the 1970s, and is now well below that of its peers.
He also mentioned that
"The key risks are domestic reform lags, in particular reforms to raise the tax revenues needed to sustainably increase infrastructure and social services spending," Chua added.
According to Chua, financing the increase in investments will need to come from a combination of tax policy and administration reforms to make the tax system simpler, more efficient, and more equitable.
In particular, the tax burden and cost of compliance for small businesses need to be reduced in the interest of job creation, he said.
"The government has successfully raised tax revenue equivalent to 1.2 percent of GDP (gross domestic product) in the last three years through the sin tax reform, improved tax administration, and higher growth. Accelerating the current reform momentum would help the country yield additional tax revenues to further expand growth that can benefit more poor Filipinos," said Chua.
In addition, the
External risks recognized
It said a number of external factors also pose risks to growth. External risks come from monetary tightening in high-income countries, a potential hard landing for
"Moving forward, the challenge facing
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