MANILA, Philippines - The International Monetary Fund (IMF) has trimmed its full-year economic growth forecast for the Philippines following a weak first quarter and an expected sluggish expansion in the second quarter.
IMF resident representative Shanaka Jayanath Peiris told reporters yesterday they now expect the Philippine economy to grow 6.2 percent, slower than the previous forecast of 6.5 percent.
The revised forecast which is below the government’s 6.5 percent to 7.5-percent target for the year, is hinged on the government’s spending for
infrastructure and services, Peiris stressed.
“In the Philippines, one of the key things for a 6.2-percent growth… is that it’s predicated on the fiscal spending of the government,” he said.
“We’re expecting a recovery in spending… we are basically assuming the government’s fiscal plan goes according to plan,” he added.
Latest data from the Department of Finance showed the government recorded a P8.5-billion surplus in the five months to May, a reversal of the P13.2-billion deficit in the same period last year.
The budget deficit this year is capped at P266.2 billion or two percent of the gross domestic product (GDP). In 2013, the deficit reached P164.1 billion, below the ceiling of P238 billion.
“The imprint on May spending slowed down a bit but we’re expecting that to reverse… we are assuming that they will catch up on spending and we are expecting it to reach their two-percent deficit target by year end,” Peiris said.
With the ongoing controversy regarding the Aquino government’s P144-billion stimulus package known as the Disbursement Acceleration Program (DAP), Peiris said this would only
be a risk to economic growth if it becomes a drag on public spending.
“It’s very hard to say [what impact it would have on growth], there’s a lot of noise right now… but if this leads to a slowdown in spending, then sure, there is a risk to growth,” he said.
“But we’re assuming there would be a catch-up, that they can meet their targets… In theory, there’s a budget there and it’s there to be executed. Just because the DAP can’t be [implemented] doesn’t mean you can’t hit the targets,” he added.
For next year, the IMF still expects the economy to grow by 6.5 percent on the back of recovery in export markets and increase in investments.
The IMF has pegged the Philippine economy’s potential growth output at 6.25 percent annually, and Peiris noted this has been rising over the years.
However, there still “lots of structural things” the government will need to put in place in order to raise it further.
The Philippine economy grew a stellar 7.2 percent last year, sustaining the already faster-than-expected 6.8 percent expansion in 2012.