The International Monetary Fund has warned that the global economic turmoil can affect the Philippines more severely this year, projecting that weakening demand in foreign markets and job cuts abroad might force foreign exchange remittances and export earnings to dwindle.

According to its latest outlook on the Philippines, the IMF sees the growth in the country’s gross domestic product (GDP) slowing down further to 2.25 percent this year from last year’s 4.6 percent.

Growth last year, when the financial meltdown in the United States developed into a full-blown global economic crisis that pushed other advanced countries into recession, already marked a sharp drop from the 2007 GDP expansion of 7.1 percent.

The IMF said the Philippines and other developing countries in Asia would feel the pinch of the crisis much stronger this year than last year, as the world economy is expected to plummet to its slowest growth since World War II.

Earlier, the IMF said the global economy could expand by only 0.5 percent this year, revising its earlier forecast of 2.2 percent, as the United States and advanced countries in Europe continue to be in recession. For the IMF, the world economy is considered in recession if the average growth hits below 3.0 percent.

“Because it is very much caught up in the kind of global factors that are affecting demand across the region, we are projecting Philippine growth in 2009, on average, to be about 2.25 percent,” Anoop Singh, IMF director for Asia and the Pacific, said during the foreign lender’s discussion on Asian economies, the transcript of which was posted on its website Tuesday evening.

The United States and Europe account for about 17 and 14 percent, respectively, of the Philippines’ export income. Anemic demand from these economies is thus expected to drag down income of Filipino exporters.

Layoffs in the manufacturing and financial sectors in the advanced economies are also seen to take their toll on foreign exchange remittances of overseas Filipinos to their families. Remittances are a major driver of domestic consumption.

“Remittances have become a very important source of revenue for many countries. Of course, the slowdown in the economies where those people from different nationalities go to work may diminish the remittances,” IMF Managing Director Dominique Strauss-Kahn said at the forum.

Easing of consumption, which is bad for business, is expected to cause unemployment to increase further, the IMF officials said.

Latest data from the National Statistics Office put the Philippine unemployment rate at 6.8 percent in October 2008, up from 6.3 percent a year earlier. With editing by INQUIRER.net