IMF Keeps 2018-19 GDP Forecasts For PH

The International Monetary Fund (IMF) maintained its 2018 and 2019 growth forecasts for the Philippines in its April 2018 World Economic Outlook (WEO) report, owing to strong domestic demand and public investment, an IMF official revealed.

In its latest report, the multilateral agency projected a 6.7 percent and 6.8 percent gross domestic product (GDP) growth for this and next year. These figures were unchanged from the WEO report issued last January.

These are, however, lower than the Philippine government’s seven to eight percent target for 2018-22. Still, IMF Representative to the Philippines Yongzheng Yang said these figures are among the highest projections they have for countries in Asia Pacific.

“We believe that the Philippine economy will continue to grow strongly, driven by solid domestic demand and public investment. The strong global growth will also provide a favorable external environment for the Philippines’ export growth, OFW remittances, and BPOs,” he said.

The latest WEO showed that IMF’s growth projection for the Philippines this year is the second highest for Asia and the Pacific after the 7.4 percent forecast for India for this year and 7.8 percent also for India for 2019.

Growth of the country’s exports has been declining due mainly to the strong rise of imports, which in turn, was due to strong domestic demand but authorities and analysts alike said this is not bad at all since the Philippine economy needs it.

In February 2018, exports contracted by 1.8 percent from a growth of 8.7 percent during the same period in 2017. On the other hand, imports rose by 18.6 percent in the second month this year from 15.2 percent rise a year ago.

Cash inflows from Overseas Filipino Workers (OFWs) last February grew by 4.5 percent year-on-year to USD2.267 billion while expansion in the first two months this year posted a higher growth of 7.1 percent to USD4.647 billion.

Growth of remittances fluctuated in 2017 given the impact of external developments. Monetary officials also said remittance inflows’ expansion is maturing, thus, the lower growth from big jumps in the previous years.

Also, the growth of Business Process Outsourcing (BPO) receipts are expected to slow down as a result of policies of US President Donald Trump even though it is not expected to contract substantially given the intrinsic desirability of Filipino workers.

Yang also said “strong domestic reform momentum, including in the area of taxation and capital market development, bodes well for private sector investment, including FDI (foreign direct investment).” These positive developments, however, are not without any counterfactors, he said.

“Main risks to this growth outlook stem from tighter global financial conditions, inward-looking policies in some advanced countries, trade tensions among major economies, and geopolitical events,” he said.

“However, the Philippines is in a strong position to manage shocks to its economy as it has ample foreign reserves and a low level of public debt,” he added.

Meanwhile, the same report projects the Philippines’ inflation rate to average at 4.2 percent this year and 3.8 percent next year.

The inflation forecast for this year is higher than the government’s two to four percent target until 2019 although it was not mentioned whether this forecast uses the 2006 base year or the newly-adopted 2012 base year.

In the first quarter this year, inflation averaged at 3.8 percent while the March 2018 figure alone registered a faster rate of 4.3 percent from month-ago’s 3.8 percent given the sustained double-digit price increases in alcoholic beverages, tobacco and sweetened non-alcoholic drinks, among other goods.

Inflation of alcoholic beverages and tobacco have been posting big jumps given the hike in sin taxes while food and non-alcoholic beverages’ inflation rate is on the rise due to the impact of newly-instituted excise tax on sugar-sweetened beverages. (PNA)