The Philippines is in a better position to weather the uncertainties caused by the global slowdown and escalating fuel and food prices, the World Bank said in a statement released on Friday.

The lender attributed the country's improvement to its fiscal and other reforms undertaken over the past years.

"With the appropriate fiscal and monetary policies, short-term growth prospects can be improved while inflationary pressures contained," it said.

However, the World Bank said that the Philippines is not insulated from the global slowdown.

Growth in the first half slowed to 4.6 percent from over 7 percent last year. In the whole year of 2007, the Southeast Asian country posted a growth of 7.2 percent, the highest over the past three decades.

"A significant slowdown in the economy is likely," said the bank, expecting that the country's growth will slow to 4 percent to 4.5 percent this year, and 3 percent to 4 percent next year.

Higher food and fuel prices have caused real household income to decline, pushing private consumption growth to its lowest level in years, said the bank.

The pace of hike in consumer goods and services started hitting double-digit levels in June and peaked at a 15-year high of 12.5 percent in August as oil prices surged to 145 U.S. dollars a barrel in late July. Since then, the annual inflation has been easing, but currently it is still as high as 11.2 percent, much higher than one year ago's 2.7 percent.

"Despite the twin challenges of slower growth and higher inflation, the situation is expected to remain manageable," said the bank.

To cope with the double challenges, the government has postponed its balance budget goal this year to allow for spending increases in infrastructure, social protection, and subsidies.

The World Bank welcomed the policy, but at the same time warned that the government "must consolidate its fiscal position and improve revenue efficiency so as to limit fiscal risks and increase the quality of spending."

On Thursday, the Manila-based Asian Development Bank (ADB) allayed the fear that the Philippines will plunge into a recession next year.

"It is difficult to make a precise projection (as to how much the Philippines will grow next year) but based on the current situation, we don't think the Philippines will be in a recession," said Neeraj Jain, ADB country director for the Philippines.

Technically, recession is two consecutive quarters of year-on-year drop in economic output.

The government's plan of high public spending will play a critical role to cushion the impact of a deteriorating global economy, he said.

While the ADB considers projections of a recession exaggerated, Jain said that the Philippines would definitely suffer from a growth slowdown next year.

The problem of easing growth has taken over accelerating inflation as the biggest cause for concern, he said.

As prices of fuel drop and as increases in prices of food products ease, Jain said inflation should no longer be much of a concern for economic managers as it had been the past months.

What was more worrisome, he said, was that the financial turmoil in advanced economies would likely affect the Philippines in terms of a pullout of investments. This, in turn, could result in higher unemployment and sluggish domestic demand.

"What you spend today is also based on what you will earn tomorrow. If you think you may not have a job tomorrow, then that will affect your consumption today," Jain said.

(Xinhua News Agency November 15, 2008)