Multilateral lender International Monetary Fund (IMF) has cut its economic growth estimate for the Philippines for last year as well as its forecast for this year amid external risks posing challenges to strong domestic fundamentals.
“The Philippines’ growth outlook remains one of the strongest in the region. Despite the weaker global economic outlook, the growth forecast for the Philippines for 2016 was only marginally lowered from 6.3 percent [in the October 2015 World Economic Outlook report] to 6.2 percent to reflect the more challenging external environment,” IMF resident representative Shanaka Jayanath Peiris said in an e-mail to reporters, citing figures from the latest report released Tuesday.
For 2015, Peiris said the IMF had estimated the Philippine economy to have grown by 5.7 percent, lower than the previous estimate of 6 percent, “reflecting growth outturns to the third quarter and weaker global growth performance.”
The gross domestic product (GDP) expanded by an average of 5.6 percent during the first three quarters of 2015. The government’s official growth target for last year was 7 to 8 percent, but economic managers had already conceded that the economy could only grow by 6 to 6.5 percent.
Peiris said the IMF kept its 2017 growth projection at 6.5 percent.
This year, the IMF expects the Philippines “to continue growing strongly, supported by a robust private domestic demand and some recovery in export growth after the dismal global trade performance in 2015,” Peiris said.
The National Economic and Development Authority sees the year 2015 to have ended with a year-on-year drop in export revenues.
“Public sector expenditure is also expected to contribute strongly to growth as budget execution continues to improve and the construction phase of a number of PPP (public-private partnership) projects kick in,” he added.
The government was on track to jack up the share of infrastructure spending to the GDP to 5 percent this year.
In the medium-term, the growth forecasts of over 6 percent were “based on an assumption of continued prudent macroeconomic policies and greater investments in infrastructure and human capital to benefit from the demographic dividend, supported by the low levels of public and private debt,” according to Peiris.
On a global scale, the risks to economic outlook “remain tilted to the downside and relate to ongoing adjustments in the global economy: A generalized slowdown in emerging market economies, China’s rebalancing, lower commodity prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States,” Peiris said.
But the country is seen to be resilient to external shocks even as risks linger.
“The Philippines is relatively less exposed to China given the low trade and financial linkages and stands to benefit from the lower commodity prices. However, a generalized slowdown in growth in the region, tighter external financial conditions due to monetary policy normalization in the US, and sudden spikes in global risk aversion are downside risks,” Peiris explained.
In general, the economy “is well-positioned to deal with external shocks because of its strong fundamentals and ample policy space,” he said.