MANILA, Philippines – Despite instability in the global economy made worse by the recent Brexit, the International Monetary Fund (IMF) is keeping its growth forecast for the Philippines for 2016.
“The Philippine economy is doing very strongly despite the external headwinds of the trade slowdown and the added market volatility from the recent Brexit,” said IMF mission head and assistant director of Asia and Pacific, Chikahisa Sumi, in a briefing on Tuesday, July 12.
Sumi added that the country is likely to survive the twin threats of the impending interest rate hike by the US Federal Reserve as well as the fallout from Brexit given how the economy has performed so far this year.
“Real GDP regained strength from a slowdown in mid-2015 to record a robust 6.9% in the first quarter of 2016, in line with our 6% year-on-year growth forecast for 2016 as a whole,” he noted.
The Development Budget Coordination Committee (DBCC) recently lowered the official GDP growth projection for the Philippines to a range of 6-7% instead of 6.8-7.8% premised on the new administration’s plans to raise infrastructure spending.
While the economy has so far performed decently, the IMF official said that it can perform even better as consumption has been consistent while foreign investment has surged. These have also happened against a backdrop of manageable inflation.
“Amid strong economic activity, inflation fell below the government’s target band in 2015 and the first half of 2016 due to lower food and fuel prices, but is expected to return to within the target range later this year and in 2017 as commodity prices stabilize,” Sumi explained.
For his part, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr said that conditions overseas continue to make the formulation of policies challenging.
Need to widen growth
Sumi pointed out, however, that the benefits of the country’s growth must reach the broader population. He noted that infrastructure quality and social indicators are still below those of the Philippines’ peers.
Because of this, the IMF also welcomed the Duterte administration’s plan to raise the deficit spending ceiling from the current 2% of GDP.
“Given the large infrastructure and social needs and ample fiscal space, we support raising the national government budget deficit to 3% of GDP over the medium term, consistent with a broadly stable debt-to-GDP ratio,” Sumi said.
“The continued solid growth in 2016, despite the external headwinds, is due in part to fiscal stimulus and supporting monetary conditions,” he added. – Rappler.com
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