MANILA — The International Monetary Fund (IMF), a recipient of a $1-billion loan from the Philippines, kept its projection for the country’s growth amid risks the country faces.
In its “April 2013 Global Financial Stability Report,” the IMF maintained the Philippines’s real growth rate of its gross domestic product (GDP) at 6 percent, which is 0.6 percent lower than the projected 6.6 percent for 2012.
The projection is in line with the IMF’s growth picture for five economies under the Association of Southeast Asian Nations (Asean), which growth the lender described as “strong… reflecting resilient domestic demand.”
The IMF said in its report released on April 16 in Washington, D.C., that the Philippines’s growth is underpinned by “robust remittance flows and low interest rates.”
The Bangko Sentral ng Pilipinas has noted that personal remittances from overseas Filipinos in February was 6.9 percent higher at $1.9 billion compared to the same period last year.
Monetary officials have also maintained low interest rates, even slashing Special Depository Account rates to sterilize the country’s financial environment.
The combo of high remittances and low interest rates has, according to the IMF, supported private consumption and investment in the Philippines.
The IMF projected consumer prices to remain stable at 3.1 percent for the year, with a slight rise by 2014 at 3.2 percent.
Current-account balance projections, however, were expected to decline this year to 2.4 percent as a share of the GDP and to 2 percent by 2014.
The IMF said these projections may be viewed in terms of the continuing drag from advanced economies, 10 of which are still a shambles, including the United States.
These economies all have a debt-to-GDP ratio exceeding 90 percent and still rising, although at different speeds, according to IMF Fiscal Affairs Department Director Carlo Cotterelli.
The IMF warned that the external risks posed by these economies are considerable.
“In the event of a severe global slowdown, falling external demand would exert a powerful drag on Asia’s most open economies, including through the second-round impact of lower investment and employment in export-oriented sectors,” it said.
If this ensues, the IMF added, a scenario of reassessment of sovereign risks would prompt further fiscal tightening and lower growth in the advanced economies.
This, hence, would effect the growth in emerging Asia, such that rates “would be reduced by about 1 percentage point on average in 2015-2016.” –Dennis D. Estopace, BusinessMirror
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