IMF forecasts higher growth for Phl this year

MANILA, Philippines - The International Monetary Fund (IMF) has raised its growth forecast for the Philippines this year to 6.5 percent in anticipation of increased domestic demand and imports as the country embarks on massive rehabilitation of typhoon ravaged regions.

The revised growth figure, while higher than its January projection of 6.3 percent, is at the low end of the government target of 6.5 to 7.5 percent.

“While this envisaged growth path is faster than what was achieved during the previous decades, realizing the Philippines’ full potential for rapid, sustained and inclusive growth calls for further reducing bottlenecks to investment and formal sector employment that may be discouraging broader-based business activities,” Rachel van Elkan, IMF’s mission chief to the Philippines, said in a briefing.

For next year, IMF’s growth forecast for the Philippines is at 6.5 percent, lower than the government’s seven to eight percent target.

“The challenge therefore is to continue implementing policies that deliver high quality, sustainable growth,” she said.

The IMF official recounted how policymakers had “adeptly navigated” the Philippine economy amid the global financial crisis in 2009.

Van Elkan said the country’s economy has remained resilient, with inflation manageable, the external sector strong and the local banking sector stable.

“Going forward, the economy is well-positioned to absorb a gradual tightening of US financial conditions and to implement timely, measured action on the domestic policy front,” van Elkan said.

But she said monetary policymakers need to remain vigilant against potential risks as advanced economies start tightening monetary policy. She also cited the need for more infrastructure spending.

“Further reforms are needed to create a more enabling business environment and to generate additional employment,” van Elkan said.

“Successfully executing PPPs (public-private partnership) projects and public capital spending projects would relieve infrastructure bottlenecks and help catalyze private investment,” she added.

The first PPP project was awarded in December 2011, a year after the program’s launch in November 2010.

The IMF mission chief also said there is a need for the government to resolve “uncertainties” over land titles and use, expand access of small- and medium-sized enterprises to formal-sector credit, and reduce skill mismatches through better targeted education and apprenticeships to facilitate job creation.

“Boosting resilience to natural disasters through building-back-better and low-cost insurance schemes would also promote poverty reduction,” van Elkan pointed out.

She stressed that improving prospects for local jobs as well as reducing the poverty rate would diminish the appeal of overseas jobs and therefore allow more local talents to remain in the country.

Van Elkan and her team yesterday concluded a two-week visit as part of the institution’s annual onsite assessment of member-countries’ weaknesses and potentials.