* WB keeps 2016 growth f‘cast for Philippines at 6.4 pct
* Philippines could surpass f‘casts on infra spending
* WB sees medium-term policy challenges for Philippines
MANILA, Oct 3 (Reuters) - The Philippines’ economic growth could exceed the World Bank’s projection of 6.2 percent for the next two years if President Rodrigo Duterte’s administration further ramps up infrastructure spending as planned, the lender said on Monday.
But the three-month-old government faces policy challenges or risks, such as the need to dispel lingering uncertainty about its policy priorities, deliver on its fiscal reform programme, and accelerate structural reforms to reduce poverty, it said.
“The Philippines’ short-term growth prospects remain positive despite a number of medium-term risks and policy challenges,” the World Bank said in its Philippine Economic Update.
The bank kept its 2016 GDP growth forecast for the Philippines unchanged at 6.4 percent and described its 6.2 percent growth projection for 2017 and 2018 as “a conservative forecast with significant upside risks.”
World Bank economist Birgit Hansl said recent volatility in local financial markets was normal because lingering uncertainty over the administration’s reform agenda could be expected to make investors cautious.
“That’s why it’s such an important short-term policy priority to dispel the uncertainty, to just say, ‘look, we mean business, this is what we’re going to do’,” she told a media briefing.
The Philippine peso last week hit a seven-year low against the U.S. dollar and foreign investors have dumped local stocks in recent weeks partly because of concerns about Duterte’s anti-American rhetoric and bloody anti-drug campaign.
The lender made no direct comment on drug-related killings and Duterte’s foreign policy, or the likely impact of such issues on economic growth prospects.
Last month Standard & Poor’s said it was unlikely to give the Philippines a credit rating upgrade in the next two years, citing Duterte’s unpredictability and uncertainty over his domestic and foreign policies.
S&P also raised the possibility it might downgrade the Philippines’ rating if the new government fails to sustain the country’s fiscal and economic gains.
Hansl said the World Bank’s outlook for the Philippines was “quite stable with real upside risk because we cannot see major policy reforms, or any policy reforms, at the moment that indicate there would be a discontinuity in these policies.”
The government has promised to ramp up infrastructure investment particularly in the countryside to build more roads, bridges and airports and to spur investment and reduce poverty in rural areas.
Reporting by Enrico dela Cruz; Editing by Eric Meijer