IMF retains Phl growth outlook

Multilateral lender International Monetary Fund (IMF) kept its economic growth projection for the Philippines as the country is expected to weather external shocks from global financial volatility and slowdown in China.

Based on its April 2016 World Economic Outlook (WEO), IMF resident representative Shanaka Jayanath Peiris said the gross domestic product (GDP) growth outlook for the Philippines was retained at six percent this year and 6.2 percent next year.

“Real GDP growth is projected at six percent in 2016 and 6.2 in 2017, unchanged from the February 2016 IMF mission statement, driven by continued strong domestic demand and a modest fiscal stimulus in 2016,” Peiris said in an e-mail.

The projected growth for the Philippines this year would be the second fastest among the As- sociation of Southeast Asian Nations (ASEAN-5) after Vietnam’s 6.3 percent.

The growth would be faster than Indonesia’s 4.9 percent, Malaysia’s 4.8 percent, and Thailand’s 3.2 percent. The GDP of ASEAN-5 is seen improving to 4.8 percent this year and 5.1 percent next year from 4.7 percent last year.

Peiris pointed out there is increased downside risks in the Philippines due to the continued economic slowdown in China, the volatile global financial market, and impact of El Niño.

“The economic outlook is one of the strongest in the region but subject to increased downside risks, including lower growth in China and the region, higher global financial volatility and capital outflows, and weather related disruptions,” Peiris said.

Peiris said, the country’s macroeconomic fundamentals remain strong while monetary conditions also remain supportive of growth.

“However, the Philippines’ capacity to respond if these risks materialize is substantial given its ample reserves and policy space, both monetary and fiscal,” Peiris said.

The Bangko Sentral ng Pilipinas (BSP) has managed to keep interest rates unchanged since September 2014 with the continued strength of domestic demand and benign inflation environment.

The country’s GDP growth accelerated to 6.3 percent in the fourth quarter of the year from the revised 6.1 percent in the third quarter due to robust domestic demand and improved government spending.

However, the country’s GDP expansion slowed down to 5.8 percent last year from 6.1 percent in 2014 due to weak global demand and

lack of government spending.

The Cabinet-level Development Budget Coordination Committee ( DBCC) lowered the country’s GDP growth forecast earlier to a range of 6.8 to 7.8 percent instead of seven to eight percent this year.

Inflation eased to 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates.

IMF sees inflation kicking up to two percent this year and 3.4 percent in 2017. The BSP has set an inflation target of two to four percent for this year and next year.

“Over the medium term, a continuation of prudent macroeconomic policies and good governance would be critical to sustain investor confidence and the growth momentum,” he said.

To support growth, Peiris said structural reforms are needed to raise the low rate of government revenue and infrastructure investment.

He added the Philippines should open up the economy to greater competition and foreign investment.