Macro support to reduce scarring effects of pandemic: IMF exec

MANILA – An International Monetary Fund (IMF) executive has underscored the importance of strengthening coronavirus disease 2019 (Covid-19) containment measures in the Philippines and ensuring macroeconomic support to address the pandemic’s impact on the economy. 

This, after the multilateral lender hiked its 2021 growth projection for the country to 6.9 percent based on the updated World Economic Outlook (WEO) Update released Tuesday night (Philippine time) from 6.6 percent in the WEO issued last January.  

But IMF Resident Representative to the Philippines Yongzheng Yang said the lender kept its 6.5-percent gross domestic product (GDP) forecast for the country for 2022.

In a reply to emailed questions from the Philippine News Agency, Yang attributed the hike of IMF’s growth forecast for the country this year to the “stronger-than-expected growth in the fourth quarter.”  

“This good momentum signals a stronger recovery this year,” he said. 

The domestic economy posted an 8.3-percent GDP contraction in the last quarter of last year, an improvement from the previous quarter’s -11.4 percent.

Full-year print reached -9.5 percent.  

Yang said higher fiscal stimulus under this year’s national budget “should also help boost economic activity”, citing the additional fund from unused Bayanihan 2 funds that will be disbursed this year.  

However, he said the latest growth forecast for the country “is subject to substantial uncertainty” given the risks from Covid-19 infections “as tightening quarantine measures could dampen economic activity.”  

Other downside risks to the growth outlook include slower-than-expected vaccinations, geopolitical and trade tensions, and potential volatility in global financial markets, he said.  

These factors are, however, expected to be countered by the fiscal stimulus of the Joe Biden administration and the much discussed infrastructure initiative, which he said “(if materialized) could boost US import demand from the rest of the world, including the Philippines.”  

“At this juncture, it is critical to continue to strengthen virus containment measures to bring virus infections under control and to maintain macroeconomic support to reduce scarring effects of the pandemic,” he said.  

He said targeted support to vulnerable households should continue while strengthening social protection programs over time.  

Instead of just providing liquidity support, Yang said the assistance should address solvency issues.  

He also cited the need for “continued structural reforms to reduce restrictions on inbound foreign investment and efforts to ease the burden of doing business and resource reallocation.  

“Finally, more efforts could also be made to accelerate a greener recovery by investing more in renewable energy and in climate mitigation and adaptation more generally.

This would make recovery and longer-term growth more sustainable,” he added.