IMF lowers PH GDP growth rate to 6%
The International Monetary Fund (IMF) has cut its 2016 gross domestic product (GDP) forecast for the Philippines to six percent from an earlier projection of 6.2 percent.
The IMF, however, expects the economy to grow higher next year at 6.2 percent but this was also a lower number compared to its previous forecast of 6.5 percent for 2017.
In the next two years, the IMF said real GDP growth will be “driven by continued strong domestic demand offsetting weak net exports.”
In concluding its latest consultation visit (February 11 to 17), the IMF mission led by Chikahisa Sumi said the local economy has “performed remarkably well” even amidst a “weaker external environment and global financial turbulence in 2015.”
“Despite a large drag from net exports, real GDP growth remained robust in 2015 at 5.8 percent, reflecting a strong pickup in private investment and public construction through the year,” according to Sumi.
The review also noted that while economic outlook is favorable it remains “subject to increased downside risks, including lower growth in China and the region, higher global financial volatility and capital outflows, and weatherrelated disruptions.”
But the IMF mission still think the country’s capacity to respond if these risks materialize is “substantial given its ample reserves and policy space, both monetary and fiscal.”
The IMF mission also noted the lower unemployment rate which it said has dropped to a 10-year low of 5.3 percent, however “significant underemployment remains.”
Inflation, in the meantime, fell below the target band (two percent to four percent) to 1.4 percent in 2015 because of lower food and fuel prizes but similar with central bank projections, they expect inflation to increase to two percent this year.
As for monetary policy
stance, the IMF said monetary conditions remain supportive of growth while fiscal policy is focused on the medium-term objectives of supporting inclusive growth and infrastructure investment. “With the deficit at two percent of GDP, the 2016 budget will provide a modest fiscal stimulus and is consistent with a declining public debt ratio. Going forward, a continued focus on raising tax revenue would be important to address the large infrastructure and social needs," said Sumi.
The IMF, whose next Article IV consultation visit is in June, added that over the medium-term, a "continuation of prudent macroeconomic policies and good governance would be critical to sustain investor confidence and the growth momentum."
"To support growth, structural reforms will also be needed to address structural issues centering around the low rate of national investment, opening up the economy to greater competition and foreign investment, and high rates of poverty and inequality," said Sumi.