Reforms, higher spending among priorities for RP

THE PHILIPPINES should pursue revenue reforms, increase spending on social services and infrastructure as well as improve the business environment to sustain growth, an International Monetary Fund (IMF) official said.

These, IMF Asia-Pacific director Anoop Singh said in reply to a question posted online during a weekend press briefing in Washington D.C., are the “threefold priorities” that will help “ensure that capital flows go to infrastructure spending where it is needed”.

The Philippine government, he noted, is aiming for fiscal consolidation in the medium term and is planning to do this through revenue-based fiscal reforms.

The IMF, in its World Economic Outlook released last week, raised its 2010 growth forecast for the Philippines to 7% from 6% in July, higher than the government’s 5-6% growth target, as it expects the Asian region to lead world recovery.

Mr. Singh said the Philippine growth outlook was adjusted on the basis of stronger than expected first half growth.

“The Philippines is among the countries whose recovery has been very strong,” he said.

“Recovery has been stronger than we expected some months ago. As in other economies in Asia, it is not just exports but also private consumption and investments which have been picking up more than we have expected before.”

The economy expanded by 7.9% in the first half, prompting the government to raise the full-year growth goal to 5-6% from 2.6-3.6%.

For 2011, meanwhile, the IMF has revised its Philippine growth projection to 4.5%, higher than the 4% forecast last July but lower than the government’s 7-8% target.

IMF Resident Representative Dennis Petrus J. Botman last week said a 2011 slowdown should be expected. “For 2011, after the recovery from the downturn in growth during 2009 and the completion of the global inventory cycle, growth is expected to moderate to its historical trends,” he said in an e-mail.

“Growth is expected once again to be driven by private consumption, as remittances remain resilient, but investment and exports should also grow at healthy rates,” Mr. Botman added.

Mr. Singh said Asian countries in the medium term should rebalance the drivers of growth by being less dependent on exports. He cited the need to shift to domestic demand and investments as a weaker than expected recovery in the US and Europe could affect trade.

“If there are shocks to growth in the US and Europe, this will affect Asia because Asia’s strength is in exports,” he said.

Growing consumption in neighboring China will not be enough to make up for demand from advanced economies.

“In many countries in Asia, the challenge is sustain investments and to manage capital inflows to be used to sustain infrastructure investment,” Mr. Singh said. — L. D. Desiderio, Businessworld