IMF sees Philippines GDP growth easing to 6.5%

MANILA, Philippines — The International Monetary Fund (IMF) has slashed its economic growth forecast for the Philippines this year, but expects a strong rebound in the second half after a weaker-than-expected expansion in the second quarter.

Yongzheng Yang, IMF resident representative to the Philippines, said in a press conference that the multilateral lender sees the country’s gross domestic product (GDP) growing by 6.5 percent instead of 6.7 percent this year.

“So last year’s growth was 6.7 percent, this year we expect growth to slow down slightly to 6.5 percent which is still one of the fastest. It is still very respectable and pretty strong,” he said.

Yang said the six percent GDP growth outturn in the second quarter from 6.6 percent in the first quarter was below expectation as the market was expecting a faster growth of 6.7 percent to 6.8 percent.

“The economy continues to perform well, but is facing new challenges. Real GDP is projected to grow strongly in 2018 and 2019, supported by domestic demand,” he added.

However, he said short-term risks have risen, including rising inflation and increased risk of overheating, and greater external uncertainty.

“The medium-term economic outlook remains favorable, which places the country in a good position to tackle still elevated levels of poverty and inequality,” the IMF executive added.

He said the IMF foresees GDP growth to pick up in the second semester after expanding by 6.3 percent in the first half of the year.

Yang said GDP growth is expected to pick up to 6.6 percent in the third quarter and further to 6.9 percent in the fourth quarter, driven by robust public and private investment as well as household spending.

 “We think the growth slowdown in the second quarter is temporary and transitional. Overall, we see growth will be driven continuously by domestic demand, on the external front the contribution will be more modest as global demand seems to be slowing,” Yang said.

For 2019, the IMF retained its GDP growth forecast at 6.7 percent.

The Duterte administration has launched a massive infrastructure build-up as it intends to spend at least P8.4 trillion until 2022 under the Build Build Build program.

Economic managers through the Development Budget Coordination Committee (DBCC) have set a GDP growth target of between seven and eight percent this year from last year’s 6.7 percent.

Earlier, the Asian Development Bank (ADB) lowered the country’s GDP growth forecasts to 6.4 percent instead of 6.8 percent this year and to 6.7 percent instead of 6.9 percent for 2019 due to weaker-than-expected expansion in the second quarter as well as rising inflation.

ADB said the lower projection reflects a moderation in agricultural output and exports as well as higher inflation and continued global monetary tightening.