The International Monetary Fund (IMF) lowered its growth forecast for the Philippines for this year and the next amid weak global conditions, a report released Tuesday evening (Manila time) showed.
In its October World Economic Outlook (WEO), the IMF said the Philippines would outperform Indonesia, Malaysia and Thailand, but grow slower than Vietnam, where cheap fuel is having a bigger positive impact than anywhere else in the region.
For 2015, the IMF said the Philippines would grow 6 percent, before accelerating to 6.3 percent next year.
Last July, the multilateral lender said it saw the Philippine economy expanding by 6.2 percent in 2015 and 6.5 percent in 2016. The Fund’s July forecasts were made before the government reported that Philippine gross domestic product (GDP) grew by just 5.3 percent this year, falling short of the government’s 7- to 8-percent target.
The October WEO was released in time for the IMF and World Bank fall meetings being held this year in Lima, Peru.
In a similar move this week, the World Bank slashed its projection for Philippine economic growth to 5.8 percent this year from the previous projection of 6.5 percent).
Despite recent cuts, the Philippine economy’s expected growth until 2016 will still be in line with the country’s performance under President Aquino’s term. From 2011 to 2014, the Philippine economy grew by an average 6 percent—faster than the average growth of below 5 percent during the preceding decade.
Last September, the Manila-based Asian Development Bank (ADB) also revised its 2015 growth forecast for the Philippines to 6 percent from its previous 6.4 percent after the economy grew at a slower pace in the first half of the year.
An update of the Asian Development Outlook 2015 said the Philippines would see a mild pullback in growth this year before the bouncing back in 2016 on a pickup in government spending and exports.
For 2016, growth was unchanged from ADB’s earlier projection at 6.3 percent.
In the first six months of 2015, the ADB said that Philippine growth came under pressure as manufacturing slowed, dampened by sagging demand for exports and flat agricultural output as the El Niño dry spell brought drought.
Government spending fell below target while the peso came under pressure, dropping 4.6 percent against the US dollar by mid-September as some funds exited developing markets, including the Philippines, the multilateral lending agency said. Meanwhile, consumption and private investment remained robust, supported by higher employment, low inflation and increasing remittances.
The ADB said government spending should accelerate in the coming months, helped by better budget execution and progress on the pipeline of public-private partnership (PPP) projects.
Election spending ahead of May 2016 and an expanded government budget next year would also underpin growth, the ADB report added.
The multilateral bank agency said that private investment and household consumption should continue to grow, with employment and remittances remaining robust and oil prices low, while services—led by business process outsourcing, tourism and retailing—would remain the main growth driver.
“Exports are likely to improve in 2016 in line with better performing industrial economies. Inflation, which has been below forecast as oil and food prices remain benign, is likely to edge up to 3 percent in 2016 with oil and other commodity prices seen rising,” the ADB said. Paolo G. Montecillo