By Ronnel W. Domingo, October 3, 2023; Philippine Daily Inquirer

Manila – The Philippines is now expected to grow the fastest in 2023 among developing economies in East Asia and Pacific (EAP), instead of Vietnam, according to the World Bank’s updated growth outlook for the region.

The World Bank said growth in EAP excluding China was projected to remain strong but slower at 5 percent—forecast at 5.1 percent last April—but still higher than the average growth for all other emerging markets and developing economies elsewhere in the world.

The multilateral lender said in its update report launched on Monday that an intensification of geopolitical tensions, and the possibility of natural disasters including extreme weather events, are additional risks that the region’s economic growth could be lower than forecast.

“The [EAP] region remains one of the fastest growing and most dynamic regions in the world, even if growth is moderating,” said Manuela Ferro, World Bank vice president for EAP.

“Over the medium term, sustaining high growth will require reforms to maintain industrial competitiveness, diversify trading partners, and unleash the productivity-enhancing and job-creating potential of the services sector,” Ferro said in a statement.

Slower Vietnam forecast

The update also showed a slower forecast for Vietnam’s growth, now 4.7 percent from 6.3 previously. Meanwhile, the forecast for the Philippines is maintained at 5.6 percent.

Looking forward to the next few years and beyond the next decade, the World Bank said the services sectors can play an increasing role in driving development in a region known for manufacturing-led growth.

Key contributors

The reported noted that the services sectors have already become key contributors to aggregate labor productivity growth over the last decade.

Export earnings from services have grown faster than receipts for goods, and the growth of foreign direct investment in services has exceeded by fivefold that in manufacturing—especially in China, Indonesia, Malaysia, the Philippines and Thailand.

Mentioned in a special section of the report was the diffusion of digital technologies and services reforms that are improving economic performance, particularly in the Philippines.

In the Philippines, the adoption of software and data analytics by firms increased the productivity of those firms by 1.5 percent on average over the period 2010-2019.

Citing data from the Philippine Statistics Authority, the World Bank observed that the digital intensity—or the use of digital technology among Philippine services firms—is higher than for manufacturing firms, as measured by their investments in IT capital per worker.

Also, the growth of digital technology adoption between 2012 and 2017 has been larger in the services sector, particularly for technologies related to data, such as cloud computing, data analytics and investments in databases and software.