IMF hikes GDP growth forecast for RP

MANILA, Philippines - The International Monetary Fund (IMF) expects the Philippines to post stronger economic growth this year and next year after successfully weathering the global financial storm mainly due to fiscal and monetary reforms.

IMF country resident representative Denis Botman said that the country’s domestic output as measured by the gross domestic product (GDP) is likely to expand by one percent this year and by 3.2 percent next year on the back of robust remittances from overseas Filipino workers (OFWs) and steady recovery of the country’s merchandise exports.

The new projection was a complete turnaround from the previous projected contraction of one percent this year and a slight growth of 2.25 percent next year.

Botman said growth in the second quarter in the Philippines also rebounded sharply, supported by continued remittance flows, a stabilizing export sector, and supportive macroeconomic policies.

The country’s domestic output expanded by a stronger-than-expected growth of 1.5 percent in the second quarter from a dismal growth of 0.6 percent in the first quarter bringing the first half GDP to one percent from four percent in the same period last year.

“The Philippines has been able to weather the global financial storm well due to past reforms. Growth is now projected at one percent in 2009 and 3.2 percent in 2010. Both are upgrades relative to the forecast we made in June,” Botman told reporters.

The Cabinet-level Development Budget Coordination Committee has scaled down the projected GDP growth this year to 0.8 percent to 1.8 percent from the original 3.1 percent to 4.1 percent. It sees the GDP expanding between 2.6 percent and 3.6 percent next year.

The IMF official pointed out that money sent home by overseas Filipinos would grow by four percent this year from $16.4 billion last year resulting in an upward revision in the current account surplus to 3.2 percent of GDP this year from 2.5 percent of GDP last year.

According to him, the country’s merchandise exports would likely grow in double-digit level next year after contracting by about 19 percent this year due to the global economic meltdown.

“The growth will come from remittance flows which we expect to be robust next year. And with the rebound in the global economy and the exports as well we should see a recovery in investments next year as well. So those are the key support for growth next year,” he said.

Likewise, IMF sees consumer prices averaging 2.8 percent this year and four percent next year.

Reforms undertaken by the government resulted in a significant decline in non-performing loans, a high capital-adequacy ratio of the banking system, and prevention of exposure to toxic assets.

Botman said decisive measures by the Bangko Sentral ng Pilipinas also ensured a healthy flow of liquidity and monetary conditions consistent with the inflation-targeting framework.

The projected one percent GDP growth this year would be slower than the 4.6 percent GDP growth in Vietnam and the four percent GDP growth in Indonesia. The GDP of Malaysia is expected to contract by 3.6 percent while that of Thailand would shrink by 3.5 percent this year.

Based on its 2009 World Economic Outlook Publication, the IMF believes that the global economy would contract by 1.1 percent this year before expanding by 3.1 percent next year.