Top Story

By Diane Claire J. Jiao, Senior Reporter

Forecasts kept by IMF

Posted on April 17, 2013

THE INTERNATIONAL Monetary Fund (IMF) has maintained its 2013 and 2014 growth projections for the Philippines, with Asia expected to again lead the global economy through another bumpy ride.

The Philippines was forecast to grow by 6% this year and 5.5% next year, the IMF said in its latest World Economic Outlook (WEO). The projections were unchanged from January’s WEO, when the IMF also concluded its Article IV consultation -- an annual review of economic and financial developments in a country.

Gross domestic product (GDP) growth is thus likely to hit the government’s 2013 goal of 6-7% but fall short of the 6.5-7.5% target for 2014. The Philippines saw 6.6% growth in 2012, topping the IMF forecast of 6.5% and the official 5-6% target.

The IMF, which trimmed its 2013 and 2014 forecasts for global growth to 3.3% and 4.0%, respectively, from January’s 3.5% and 4.1%, was more optimistic of growth prospects in Asia.

The ASEAN-5 (Association of Southeast Asian Nations), comprised of the Philippines, Indonesia, Thailand, Malaysia and Vietnam, could see higher growth this year, with the forecast at 5.9% from 5.5% previously.

The 2014 estimate for the group, though, was trimmed to 5.5% from 5.7%.

The ASEAN-5 notched 6.1% GDP growth last year -- with the Philippines topping the group -- beating the regional average of 5.3%.

“Growth in the ASEAN-5 economies will remain strong at 6% in 2013, reflecting resilient domestic demand,” the IMF said.

In the Philippines, it added, growth should be supported by robust remittance flows and low interest rates, spurring private consumption and investment.

Overseas remittances hit a record high of $21.391 billion last year, 6.3% up from 2011’s $20.117 billion and beating the central bank’s 5% forecast.

Remittances are again expected to increase by 5% this year. They totaled $3.363 billion as of February, a 6.97% jump from the comparable 2012 period.

Interest rates are also at record lows, with monetary authorities looking to support the booming economy. Policy rates have been kept at 3.5% and 5.5% for overnight borrowing and lending, respectively, this year. They were slashed by a total of 100 basis points last year.

Even as global risks recede, however, the IMF warned that there were still problem areas within Asia. Easy monetary conditions have created financial imbalances, sparking fears of asset bubbles. Trade and investment could also be disrupted by territorial disputes, stalled reforms in China and the loss of confidence over stimulus efforts in Japan.

“They key medium-term priority is to sustain economic growth and make it more inclusive ... Asian policy makers should also undertake coordinated and collective action to deepen regional trade integration,” the IMF said.

Advanced economies are expected to get on the road to recovery, although the ride could be bumpy. They are expected to grow by 1.25% this year and 2.25% the next, compared to the previous forecasts of 1.4% and 2.2%, respectively.

The improvement is due to policy responses made by the United States, Europe and Japan to address stasis in their economies, the IMF explained. However, downside risks remain with the absence of fiscal consolidation plans, limited space for monetary policy and high private sector debt, among others.

“Unless policies address these risks, global activity is likely to suffer periodic setbacks. By the same token, a stronger-than-projected policy response could also foster a stronger recovery in activity,” the IMF said.