IMF hikes RP growth forecast to 3.6%

MANILA, Philippines – The International Monetary Fund (IMF) upgraded anew the Philippines’ economic outlook but the country is still expected to be the laggard in terms of economic growth among Southeast Asian countries this year.

In its latest World Economic Outlook, the IMF said the country’s gross domestic product (GDP) would expand by 3.6 percent this year instead of the previous growth forecast of 3.2 percent on the back of an improving environment for private investment that would further boost private consumption.

The GDP growth forecast for the Philippines is slower than Taiwan’s six percent, Indonesia’s six percent, Vietnam’s six percent, Singapore’s 5.7 percent, Thailand’s 5.5 percent, and Malaysia’s 4.7 percent.

The IMF said the Association of Southeast Asian Nations (ASEAN-5) – Indonesia, Thailand, Philippines, Malaysia, and Vietnam would grow by 5.5 percent this year.

“The ASEAN-5 economies are projected to grow by 5.5 percent in 2010. Private domestic demand is expected to be the main driver of growth, with net exports playing a lesser role than in the past, reflecting stronger imports relative to historical standards,” the multilateral lender added.

The IMF stated in the report that higher investment inflows would help boost private consumption.

“For many ASEAN economies – notably the Philippines, Thailand, and Malaysia – improving the environment for private investment can play an important role in boosting private domestic demand,” IMF said.

According to him, greater exchange rate flexibility would help boost purchasing power of consumers.

“Greater exchange rate flexibility in many economies would also facilitate rebalancing by raising households’ purchasing power and helping shift productive resources from the tradables to the nontradables sector,” it said.

The IMF forecast was within the target set by the Cabinet-level Development Budget Coordination Committee (DBCC).

Economic managers see the country’s GDP expanding between 2.6 percent and 3.6 percent this year after slackening to 0.9 percent last year due to the full impact of the global economic meltdown.

For 2011, the IMF said the GDP growth of the Philippines would further improve to four percent but would still be slower compared to Vietnam’s 6.5 percent, Indonesia’s 6.2 percent, Thailand’s 5.5 percent, Singapore’s 5.3 percent, and Taiwan’s 4.8 percent.

The international lender likewise expects inflation to average five percent instead of four percent this year and 4.0 percent next year.

The inflation forecast of IMF was well within the inflation target of between three percent and 5.5 percent set by the Bangko Sentral ng Pilipinas (BSP) for this year and three percent to five percent for next year.

Last January 29, the executive board of the IMF concluded the Article IV consultation with the Philippines . Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with member-countries every year.

On the fiscal front, despite the relatively stronger fiscal response in 2009, the IMF said only a few Asian economies appear to face debt-sustainability challenges on a scale similar to those in many advanced economies.

“If the strength of autonomous private domestic demand is uncertain, continued fiscal support would be appropriate especially in economies that face weaker demand from abroad and demand-rebalancing challenges,” it added. –Lawrence Agcaoili (The Philippine Star)