RP seen to grow by 6.2% this year

MANILA, Philippines – The economy is poised to grow by 6.2 percent this year on the back of a recovering global environment, the Institute of International Finance (IIF) said in its latest report on the country.

IIF said that aside from a recovery in the global economy, investors’ optimism on the new government also bodes well for the country.

The global research firm believes that President Aquino is likely to take the “window of opportunity” provided by favorable economic trends, in pursuing fiscal reforms that would boost gross domestic product (GDP).

It also welcomed the news that Mr. Aquino’s priority would be to address the fiscal slippage which he described as “alarming.”

IIF said the Aquino administration should be able to reverse the worsening budget deficit trend before it undermines investor confidence.

“After remaining below two percent of gross domestic product a year between 2006 and 2008, the National Government budget deficit moved up to 3.9 percent in 2009 and jumped to 6.9 percent in the first quarter of 2010. The new administration should be able to reverse the upward trend in the budget deficit before it undermines investor confidence. Government debt is below 60 percent of GDP and the economy has recovered from last year’s crisis-induced slowdown, which provides scope for cutting back additional spending aimed at countering the crisis. Fiscal adjustment will complement President Aquino’s anti-corruption campaign, so his first budget due out in the third quarter should reveal much about the new government’s intentions,” it said in its report.

IIF said that the stronger economic growth would also allow the Aquino administration to gradually exit from the stimulus package that the Arroyo administration implemented starting 2008 when the global financial crisis struck.

The interagency Development Budget Coordination Committee, the group that sets the country’s macroeconomic assumptions, has revised upward the government’s economic growth projection for the year to five percent to six percent from 2.6 percent to 3.6 percent. In the first quarter of the year, the economy grew by 7.3 percent.

It also revised the budget deficit ceiling for the year to roughly P300 billion from P293 billion previously because of higher economic growth. –Iris C. Gonzales (The Philippine Star)