MANILA, Philippines – Multilateral lender International Monetary Fund (IMF) yesterday slashed anew the economic growth forecasts and the inflation projections for the Philippines this year.
IMF mission chief Vivek Arora said in a press conference that the agency is now seeing the country’s gross domestic product (GDP) expanding by 3.7 percent instead of 4.7 percent this year and by 4.2 percent instead of 4.9 percent next year.
“GDP growth slowed in the first three quarters of 2011 owing to a fall in semiconductor exports and a temporary fall in public investments as new practices are put in place to improve the transparency and efficiency in government expenditure,” Arora said.
For 2012, the IMF said the country’s GDP growth would recover to 4.2 percent as public spending are expected to improve after a dropping this year while private demand would remain resilient.
“The Philippines is being affected along with other countries in the region by the fragile global environment, but macroeconomic conditions remain generally sound,” Arora added.
Latest data from the National Statistical Coordination Board (NSCB) showed that the GDP growth of the Philippines slackened to 3.2 percent in the third quarter from 7.3 percent in the same quarter last year due to weak global trade and underspending by the Aquino government, bringing the GDP expansion to 3.6 percent from January to September this year.
Economic managers led by Socioeconomic Planning Secretary Cayetano Paderanga said it would be difficult for the government to meet the revised GDP growth of 4.5 percent to 5.5 percent set by the Cabinet-level Development Budget Coordination Committee (DBCC).
Just last September, the IMF through its September 2011 World Economic Outlook (WEO) lowered the country’s GDP growth forecast to 4.7 percent this year and to 4.9 percent next year instead of five percent in its previous WEO released last April.
“But two things have changed, one is that developments in the economy in second and third quarters has been relatively weak and the global environment has become less optimistic. It is a combination of the actual unfolding of GDP developments at home and in the global environment,” Arora said.
According to him, the key challenge for the Philippines is to navigate through the period of global uncertainty to maintain macroeconomic stability while building foundations for faster and more inclusive growth.
“The key feature of this outlook is the global environment. We see downward risk at this point. The outlook in global economy is sluggish. We don’t expect much support on external demand but we feel that domestic demand will offset the effects of external demand next year,” he said.
The IMF official added that inflation would remain within the three percent to five percent target set by the Bangko Sentral ng Pilipinas (BSP) this year and next year while the country’s external payments position including the balance of payments (BOP) surplus would remain strong.
“The authorities’ policy management is supporting confidence and has built up room for a strong response should further negative shocks occur,” Arora explained.
The IMF team also said there is no need to raise or reduce interest rates as the country’s monetary conditions has responded well to changing cricumstances and remain supportive of growth.
“Monetary conditions remain supportive of growth, suggesting that an easing of conditions is not needed at this time. If global downside risks or further negative shocks were to materialize, monetary policy could be recalibrated,” he said. –Lawrence Agcaoili (The Philippine Star)
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