The Philippines must concentrate on attracting more investment in order to combat the entrenched problem of unemployment if it wants to sustain its economic growth, the World Bank warned on Friday.
In its latest East Asia and Pacific Update report, issued every six months, the World Bank noted that the Philippines had achieved "unprecedented success in fiscal policy in a difficult political environment," posting growth of more than five percent annually in the past three years.
This is the first time this Southeast Asian archipelago has enjoyed such growth rates since the 1970s, the Bank added, also citing success in controlling inflation.
The World Bank forecast gross domestic product (GDP) growth at 5.6 and 6.0 percent in 2007 and 2008 respectively after 5.4 percent last year.
The International Monetary Fund has previously forecast GDP growth of 5.8 percent for the Philippines this year while the government is hoping for at least 6.1 percent.
However the World Bank warned that despite such growth, "unemployment has remained steady in excess of 10 percent in the Philippines and underemployment has grown to 22.7 percent from 17.6 percent two years ago.
"Increasing investment will be key to job creation. In the Philippines, overall investment has been stagnant in real terms and has declined as a share of (total output) to below 15 percent. Firms have also been facing big competitive pressures in world markets, not least from China's booming economy," the report said.
"A strong focus on strengthening the investment climate and improving labor force skills will thus be important for the Philippines," the World Bank added.
The bank said that if the Philippines showed the same determination to improve its investment climate as it did its fiscal position, then "higher growth would be more likely and its impact on job generation and poverty reduction would be more beneficial."
The Philippines' other major challenge is "to combine growth with equity," since some 34 million Filipinos still live on less than two dollars per day, the World Bank said.
"Income inequality also remains high relative to other countries in the region. High inequality can hamper growth as poor people without access to credit may be unable to exploit investment opportunities," the report said.
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