PH seen growing by 6.8%
The Washington-based International Monetary Fund sees the Philippine economy expanding 6.8 percent and withstanding external shocks amid strong fundamentals.
The IMF’s April 2017 World Economic Outlook report showed that the multilateral lender was expecting the Philippines’ gross domestic product (GDP) to grow by 6.8 percent this year and 6.9 percent next year.
The IMF’s growth forecast for 2017 was within the government’s 6.5-7.5 percent target, but the projection for 2018 was below the 7-8 percent goal until 2022.
“Economic activity is forecast to accelerate slightly in 2017 in four Asean-5 economies (Indonesia, Malaysia, Philippines, Vietnam)… In these economies, the near-term pickup in growth is underpinned to a significant extent by stronger domestic demand and, in the Philippines, by higher public spending in particular,” the IMF said.
“Public spending is expected to rise as the fiscal deficit target has been increased to 3 percent of GDP in 2017 and provide a stimulus to economic activity,” IMF resident representative in the Philippines Shanaka Jayanath Peiris said in an e-mail to reporters yesterday, referring to the Duterte administration’s programmed wider budget deficit.
Peiris added that the “robust” GDP growth projections for 2017 and 2018 would also be led by a recovery in exports.
“The external position of the Philippines will continue to be comfortable with ample international reserves and the lower current account surplus related to higher capital goods imports and investment,” he said.
As for external risks, “spillovers from lower growth in China or higher global financial volatility should be manageable for the Philippines due to its strong economic fundamentals, ample policy space, and limited trade and financial linkages with China,” Peiris said.
“Nonetheless, the Philippines would be affected more strongly should growth for the region slow. The impact from a tightening of US monetary policy would depend on the extent to which it is driven by stronger US growth. Protectionist policies in advanced economies would have an overall negative impact in Asia including the Philippines but the magnitude of impact and channels would depend on the specific policies that are still uncertain,” he added.
Moving forward, Peiris said the government must sustain its inclusive growth thrust by pursuing comprehensive tax reform to fund investments on infrastructure and human capital.
“The authorities see more inclusive growth at the center of their policy challenges. Key priorities include closing the gaps in infrastructure and human development, particularly in rural areas where poverty is highest. Fiscal policy is correctly focused on more inclusive growth by increasing social and infrastructure expenditure, financed with additional borrowing and higher revenue,” he said.
