The International Monetary Fund (IMF) has cut its growth forecasts for the Philippines for this year and the next due to the adverse impact of the global economic climate and lower-than-expected public spending in the first three quarters.
The IMF now expects the Philippine economy to grow by a mere 3.7 percent this year, and by 4.2 percent next year—lower than its earlier projections of 4.7 and 4.9 percent, respectively.
“The Philippines is being affected along with other countries in the region by the fragile global economic environment, but macro-conditions remain generally sound,” the IMF said in a statement.
The lingering debt crisis in the eurozone and the weak performance of the US economy have led to a decline in demand for exports from the Philippines.
Exports plummeted by 3.1 percent in the first 10 months of the year to $37.185 billion from the $38.362 billion reported in the same period last year. This was driven by the slowdown in global demand for electronics, the Philippines’ major export product.
Vivek Arora, head of the IMF team that reviewed the country’s economic performance, said in a press conference Monday that the institution also took into account the country’s growth in the first three quarters when it revised its projections for the Philippines.
During the period, the country’s gross domestic product grew by 3.6 percent from a year ago. As a result, the country would not likely achieve its full-year growth target of between 4.5 and 5.5 percent, said the National Economic and Development Authority.
The weak growth rate was due not only to the decline in exports but also the government’s underspending.
The budget department said public spending in the first three quarters was less than what was programmed because it scrutinized the expenditure proposals of line agencies to prevent corruption.
But the government vowed to accelerate spending in the fourth quarter of this year and next to allow the economy to recover from the slowdown seen earlier in 2011.
“Fiscal policy should provide welcome support for growth in 2012, as expenditures rise from their unexpectedly low level this year,” IMF said in the statement.