IMF keeps 2019 GDP forecast
Credit to Author: Tyrone Jasper C. Piad| Date: Mon, 18 Nov 2019 16:18:56 +0000
The International Monetary Fund (IMF) has kept its economic growth forecast for the Philippines at 5.7 percent this year and revised upward the 2020 outlook to 6.3 percent — from 6.2 percent previously — on the back of better government spending and easing of monetary policy.
“The medium-term economic outlook remains favorable, especially if the strong structural reform momentum continues,” IMF said in a statement on Monday.
According to latest data, the national government spending in the first nine months reached P2.62 trillion, up 5.5 percent or P137.2 billion from the previous year. Of the total, P546.3 billion was spent for infrastructure and capital outlays.
The Bangko Sentral ng Pilipinas (BSP), meanwhile, has cut the monetary policy twice, bringing the overnight reverse repurchase facility to 4 percent. Interest rate on the overnight deposit and lending facilities stood at 3.5 percent and 4.5 percent, respectively.
IMF noted that the country is still one of the “best-performing economies in the region,” as evidenced by recovering economic growth and easing inflation.
The Philippine economy grew by 6.2 percent in the third quarter of the current year from 6.0 percent a year ago, driven by growth in government spending and consumption.
However, IMF said that “the near-term rebound in GDP (gross domestic product) growth could be weaker than expected because of global trade tensions and related policy uncertainty, a change in global financial conditions and natural disasters.”
Consumer price growth, meanwhile, weakened to 0.8 percent in October — lowest since 0.9 percent notched in May 2016 — from 0.9 percent a month ago and 6.7 percent a year ago.
“Inflation has declined, reflecting lower oil prices, rice tariffication, and a decisive monetary policy response to the inflation spike in 2018,” it noted.
Considering global commodity prices and domestic policy trajectories, IMF said that inflation may settle at 1.6 percent this year and at 3 percent in 2020.
The projection is within the 2- to 4-percent target set by the government.
“The recent cuts in the BSP’s policy rate are appropriate for achieving the inflation target in the next one to two years, barring any unforeseen events,” IMF said.
In order to promote inclusive growth, IMF said the government should focus also on “continued tax reform, relaxing restrictions on foreign investment, broadening poverty reduction efforts, easing the stringent banking secrecy law, and upgrading the capacity of public administration.”