IMF: RATE CUTS TO HELP PHL GROW FASTER
THE International Monetary Fund (IMF) gave its nod to the Bangko Sentral ng Pilipinas’s (BSP) accommodative monetary-policy setting this year, saying this would help the country’s economy climb back to the 6-percent territory in 2020.
In its Regional Economic Outlook (REO), the IMF said Manila’s easing of its monetary policy is “desirable” as inflation pressures have subsided and growth has slowed. Other economies that obtained a stamp of approval for the same move were India, South Korea and Thailand.
For the entire region, the IMF warned that growth in Asia is expected to moderate to 5 percent, from its earlier forecast of 5.4 percent for this year and 5.1 percent for 2020.
“A marked deceleration in merchandise trade and investment, driven by distortionary trade measures and an uncertain policy environment, is weighing on activity, particularly in the manufacturing sector,” the report read.
Among the external risks that Asian countries, including the Philippines, will face include the worsening of the United StatesChina trade tensions, weaker-than-expected growth of key trading partners, higher oil prices, and a disorderly Brexit.
Risks within the region include a faster-than-expected slowdown in China, a deepening of regional tensions such as Japan’s and Korea’s bilateral relationship, rising geopolitical risks, and increased incidence of natural disasters.
The anemic regional growth was reflected in the economic performance of the Philippines in the first half of the year when GDP expansion hit only 5.6 percent due to several internal and external factors. The budget delay was cited as the single biggest factor that slowed GDP growth during the period.
Inflation was tamer this year, unlike in 2018 when government grappled with higher food and oil prices. In January to September, government data showed that inflation averaged 2.8 percent.
Inflation is expected to average around 1 percent in the remaining months of 2019.
The continuous decline in inflation led
the BSP to cut monetary policy rates by 75 basis points this year to stimulate demand and boost GDP.
The IMF said it expects Philippine economic growth to return to the 6-percent territory next year. It joined the World Bank, the Asian Development Bank and the Asean +3 Macroeconomic Research Office in tempering its growth expectations for the Philippines this year.
In particular, the IMF projected a 6.2-percent GDP expansion for the Philippines next year. This is higher than their average forecast of 6 percent for emerging market economies, the 5.1-percent average forecast for the entire Asia and the 4.8-percent average forecast for Southeast Asian economies.