No change to IMF forecast

THE INTERNATIONAL Monetary Fund (IMF) has maintained its 2012 growth forecast for the Philippines amid a deteriorating global economic environment, choosing not to follow upgrades announced by two other multilateral lenders.

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In an updated World Economic Outlook released yesterday, the IMF said it expected the Philippine economy to expand by 4.8% this year and the next. The estimate for 2013 is down slightly from the 4.9% announced last July.

The move compares to higher 2012 estimates released by the World Bank (5% from 4.6%) and the Asian Development Bank (5.5% from 4.8%), which both expect growth to moderate to 5% next year.

The upgrades came as the economy expanded by 6.1% in the first half, well above 2011’s lackluster 3.9% growth and topping the government’s 5-6% full-year target.

The IMF said the global economic slowdown was worsening as it cut its growth forecasts for the second time since April and warned US and European policy makers that failure to fix their economic ills would prolong the slump.

It said global output would grow by just 3.3% this year, down from the July estimate of 3.5%. That would make this the slowest year of growth since 2009 when the world was struggling to pull out of the global financial crisis.

It predicted only a modest pickup next year to 3.6%, below its July estimate of 3.9%.

The IMF noted that growth in the ASEAN-5 bloc, which counts the Philippines, Indonesia, Thailand, Malaysia and Vietnam, was being held back by a weaker external demand.

“Weaker external demand is the main factor underpinning generally modestly weaker growth in the ASEAN-5 economies in 2012,” it said.

The outlook for the grouping was maintained at 5.4% for this year, while next year’s was downgraded to 5.8% from July’s 6.1%.

Thailand’s 2012 growth forecast — 5.6% from 5.5% — was the only one upgraded by the IMF, which noted reconstruction efforts and a surge in investments after 2011’s massive floods.

The Philippines’ and Malaysia’s 2012 growth outlook were kept, while Indonesia’s and Vietnam’s were downgraded. All 2013 projections for ASEAN-5 were cut.

Commenting on the IMF report, central bank Deputy Governor Diwa C. Guinigundo yesterday said, “This means two things: the motivation for greater capital inflows becomes stronger and the demand for commodities and services can decline.”

“The first would require a careful calibration of monetary policy to ensure one, liquidity does not become excessive; two, the peso does not get to be excessively strong; and three, asset price inflation does not happen,” Mr. Guinigundo said in a text message from Tokyo where he is attending an IMF/World Bank meeting.

“The second one in a sense will help temper inflationary pressure and help BSP (Bangko Sentral ng Pilipinas) manage inflation without having to adjust its monetary stance one for one.”

The impact of a worsening global slowdown will be discussed during a rate setting on Oct. 25, Mr. Guinigundo said. –KATHLEEN A. MARTIN, Reporter with Reuters