According to the IMF, there is a need for the Philippines to "act forcefully and without delay" to increase tax revenue and improve business environment.
In its 2004 World Economic Outlook released yesterday, the IMF estimated world economic growth to average 4.6 percent this year, with emerging Asia tagged as the most promising region in the world, both in terms of being a major producer and consumer.
The region is expected to grow by 7.2 percent this year and by 6.8 percent in 2005 although the Philippines is estimated to grow by only 4.5 percent this year and 4.2 percent next year.
Per IMF definition, emerging Asia includes China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan Province of China, and Thailand.
The IMF’s economic growth projection for the region is lowest in the Philippines and highest in China (8.5 percent) and Thailand (seven percent).
Indonesia is expected to grow by 4.8 percent while Pakistan and Bangladesh are expected to grow by 5.4 percent and 5.8 percent, respectively.
Investment has been growing briskly in China although in countries like the Philippines, capital growth is being held back by lingering balance sheet problems and political uncertainties related to upcoming elections.
With growth accelerating and some financial imbalances emerging, the IMF said many countries in the region may need to gradually tighten macroeconomic policies in the coming year.
In the Philippines, the IMF said vulnerabilities remain, highlighting the importance of staying the fiscal course and standing ready to tighten monetary policy should exchange rate depreciation pose a threat to the attainment of the inflation target.
"Thereafter, the priorities are to act forcefully and without delay to increase tax revenue, restructure the power sector, strengthen the banking system, and improve the business environment," the IMF said.
According to the IMF, the economies in emerging Asia have grown at an extraordinary pace over the past three decades and the characteristic of the rapid economic development has been the emphasis on outward-oriented growth strategies.
This has been reflected in high trade growth and a steady increase of emerging Asia’s share in global trade, which more than doubled from eight percent in 1978 to 19 percent in 2002, the Fund said.
Emerging Asia, according to the IMF, accounted for 44 percent of world GDP growth in 2002 and for 24 percent of export growth in the rest of the world.
However, exports continue to play an important role in growth in emerging Asia. Exports of goods and services remained close to 40 percent of GDP, while they accounted for 78 percent of total demand growth in 1999-2002, up from 66 percent in 1990 - 96.
"The sharp rise in intraregional trade suggests that the region as a whole is becoming less dependent on the rest of the world and more of an autonomous engine of growth," the IMF said. "Increased trade integration has clearly resulted in closer links between economies in the region and greater business cycle correlation across countries."