IMF hikes RP growth forecast to 4%

The International Monetary Fund (IMF) has adjusted upward its growth forecast for the Philippines from 3.5 percent to four percent this year despite expectations of a slower-than-expected global economic recovery due in part to the US-Iraq war.

In a report called World Economic Outlook released in Washington Wednesday night (Manila time), the IMF said that its economic projection for the Philippines has been revised upward after the country exceeded expectations in 2002.

"The 2003 (Philippine) growth projection has been revised upward to four percent since the September 2002" projection of 3.8 percent, the IMF said.

IMF resident representative Vikram Haksar told reporters yesterday that the 2002 economic performance was buoyed by the strong performance of the services and mining sectors.

This year, Haksar said, the growth would reflect the carry-over of the 2002 growth momentum as well as the strong performance of the telecommunication and agriculture sectors which he said "appeared poised for another strong year."

However, Haksar said the growth outlook is tempered by weaker prospects for electronic exports and the continuing global uncertainties which could affect remittances and investment.

"There has been a lot of talk about intra-regional trade and how China has boosted demand within the region but in the final analysis, we know that China’s demand is ultimately dictated by its final markets which are still the developed economies," Haksar explained. "So this increase in intra-regional trade is still influenced by how these final markets are going to perform," he added.

On the other hand, Haksar said the recent moves by the Bangko Sentral ng Pilipinas (BSP) to tighten its monetary policies should help contain the national average inflation rate to about four percent this year.

For 2003, the IMF had earlier projected the country to generate a current account deficit equivalent to 3.3 percent of GDP while the overall balance of payments is projected to reach a deficit of $1.1 billion against last year’s $500-million surplus.

According to Haksar, however, the revised outlook indicated that the current account is projected to "remain broadly in balance" although he admitted that this forecast is preliminary and contingent on the further adjustments after the government releases the revised import statistics for 2002.

Haksar said the main risks to this year’s economic outlook still arise from the fiscal situation and the increasing uncertainty in external financing.

"The erosion of the government’s tax base as well as the tariff reductions of the National Power Corporation have increased the overall public sector external borrowing requirement," Haksar pointed out.