MANILA - Taking back its previous negative growth forecast, the World Bank is expecting the Philippine economy to grow by 1.4% this year.

In its latest report, the bank said this would be driven mainly by "better-than-expected" remittance inflows and the country's strong performance in the second quarter, when it posted a 1.5% gross domestic product (GDP) growth.

Other growth drivers include a "stronger fiscal impulse" for this year and 2010, and a better outlook for the global economy.

"We are raising our GDP growth forecast to 1.4% for 2009 and 3.1% for 2010," the World Bank Philippine Quarterly Update said. The report was released in a briefing on Wednesday.

The World Bank's growth forecast for the Philippines has been swinging from positive to negative territory since early this year. In April, the bank projected a 1.9% growth for the country, a far cry from the government's target of 3.7% to 4.4%.

Two months later, the multilateral lender said the Philippines is likely to hit an "outright recession" with a -0.5% growth, as the country's key markets such as the United States were hard-hit by the global slowdown. At that time, the government lowered its growth targets to a range of 0.8% to 1.8%.

Last month, the World Bank hinted that the Philippines may post positive growth this year, adding that the government's full-year projection "seems to be feasible."

Structural weaknesses

The Philippine economy has been more resilient to the global crisis compared to most of its Asian neighbors primarily because of its limited reliance on foreign markets.

But according to the World Bank, part of the reasons for the country's relatively good performance can be traced to its "structural weaknesses."

Specifically, the multilateral lender noted the Philippines' inadequate infrastructure on energy and transport, a weak investment climate due to governance concerns, and historically weak public finances.

"Reforms in these areas have remained pending for a long time and it is difficult to envision a sustained resumption of economic growth without major improvements on all 3 fronts," the World Bank said.

In an earlier study, Philippine Institute for Development Studies (PIDS) also cited the Philippines' structural problems as one of the factors that kept the economy afloat amid the global crisis.

The group said most people did not suffer from the effects of the slowdown as they belong to the "chronic poor," or those who remain in poverty regardless of the current state of the economy.

Developing East Asia

Meanwhile, the World Bank is expecting the developing East Asia and the Pacific region to grow 6.7% this year, thanks to China's expected 8.4% growth. Excluding China, the multilateral lender is looking at a meager 1% growth, lower than most regions.

Developing East Asia includes China, Indonesia, the Philippines, Thailand, Vietnam, Cambodia, Lao PDR, Mongolia, Papua New Guinea, and the island economies of the Pacific.

"The economic rebound in East Asia and the Pacific has been surprisingly swift and very welcome, but take China out of the equation and the regional picture is less rosy," the World Bank said.

For 2010, the World Bank said the region is likely to post a 7.8% growth. The bank said countries in developing East Asia can still grow rapidly despite the slow recovery in other advanced economies.

"To take advantage of the growth potential ahead, countries need to resist protectionism, remain open and become more, not less integrated with the regional and global economies," the World Bank said. By Karen Flores, abs-cbnNEWS.com