World Bank Urges Philippines to Enhance Climate Resilience for Sustained Growth

The report also emphasizes the need for the government to improve the efficiency, transparency, and inclusive use of public resources in climate adaptation, mitigation, response, and rehabilitation efforts.

The Philippines needs to intensify efforts to bolster community resilience against the impacts of climate change and extreme weather to minimize economic disruptions and sustain inclusive growth, according to the World Bank’s Philippines Economic Update (PEU) released today.

The report also emphasizes the need for the government to improve the efficiency, transparency, and inclusive use of public resources in climate adaptation, mitigation, response, and rehabilitation efforts.

"The current El Niño phenomenon exemplifies the severe disruptions that extreme weather events, intensified by climate change, can cause,” said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, the Philippines, and Thailand. “These disruptions include impacts on educational services, reductions in farm yields, and constraints on water and electricity supplies. Proactive measures to bolster community resilience against such climatic challenges are crucial and can significantly mitigate their adverse effects on the country's growth outlook."

The Philippine economy is forecasted to accelerate to 5.8% growth in 2024 from 5.5% in the previous year, reaching 5.9% in 2025. This growth is expected to be driven by strong household consumption, sustained strength in the services sector, and improved trade due to a rebound in global demand for goods and the continued recovery of services exports such as tourism.

The growth forecast is based on the expectation that inflation will ease, thus strengthening household purchasing power. Growth is also expected to benefit from the government’s commitment to public investment, with plans averaging 5.7% of GDP from 2024 to 2026, including 124 new flagship infrastructure projects.

However, the growth outlook faces risks from higher-than-expected inflation, extreme weather and climate change, global geopolitical tensions, tighter-than-expected financial conditions, and a potential sharper slowdown in China. A prolonged El Niño event, and possibly a La Niña, could strain the domestic food supply and trigger increased inflation.

“To manage inflation, the continued implementation of non-monetary strategies is essential, including efforts to optimize supply and demand management and to secure timely and adequate imports of staple food items,” said World Bank Senior Economist Ralph Van Doorn. “The government needs to continue providing social assistance to vulnerable groups who are disproportionately affected by high food inflation.”

In September 2023, the government launched the El Niño National Action Plan, focusing on building resilience in water, agriculture, electricity, health, and public safety. To manage the impacts of El Niño, a climate pattern produced by warming oceans, the government has implemented strategic measures, including financial assistance to rice farmers, fuel subsidies for farmers and fishers, and allocations for insurance claims and credit assistance for affected farmers and fishers.

The report also underscores the importance of enhancing revenue collection to sustainably finance the country's development priorities. Achieving the Philippines’ fiscal targets by 2028 and sustainably financing government development priorities will depend on robust tax revenues.

Additional revenue efforts could focus on broadening the tax base, rationalizing tax incentives, strengthening tax administration, and improving collection efficiency. Fiscal consolidation could help preserve confidence in the economy, increase private investment and productivity, and lead to sustainable increases in public investment in infrastructure, health, and education.