MANILA –Higher-than-expected growth of the Philippine economy in the third quarter of 2016 made the International Monetary Fund (IMF) revise upwards its projection for the domestic economy this year to 6.8 percent.
This was previously at 6.4 percent, based on the lenders’ update in September 2016.
IMF Representative to the Philippines Shanaka Jayanath Peiris earlier disclosed the possible update of the lender’s 2016 growth forecast for the Philippines after gross domestic product (GDP) print in the third quarter of last year posted its highest for almost three years at 7.1 percent, which is also the highest in the region for the period.
The GDP in the first three quarters of 2016 averaged seven percent, the upper end of the government’s six to seven percent target for the said period.
”The Philippines is expected to maintain its strong GDP growth momentum registered in 2016 into 2017 at a pace of about 6.8 percent, supported by a fiscal stimulus as the budget deficit widens towards the three percent of GDP target,” he said Monday.
The IMF official said exports, which was hurt by the weak global economy, “are also anticipated to recover reflecting the pick-up in global growth and commodity prices.”
“The medium-term growth outlook would depend on the more uncertain global economic outlook and the passage of the administration’s tax reform proposals that would be important to continue to raise public infrastructure investment and social spending to benefit from the demographic dividend,”he added.
The upgrade of the country’s projected growth is in line with the multilateral lender’s projection of possible bigger impact from the stimulus program in the US and China than currently projected.
IMF, in its World Economic Outlook (WEO) released Monday night (Philippine time), has a 4.1 percent growth forecast for emerging market and developing economies for 2016 and this is expected to rise to 4.5 percent this year and 4.8 percent for 2018.
The growth outlook for 2017, is however 0.1 percent lower than IMF’s projection made in October last year.
Growth for the Association of Southeast Asian Nations (ASEAN) 5, which groups Indonesia, Malaysia, Philippines, Thailand and Vietnam, is projected to be at 4.8 for 2016, 4.9 percent for 2017 and 5.2 percent in 2018.
The 2017 projection is lower by 0.2 percent than the figure in the October 2016 projections.
IMF, in its latest report, said “emerging market and developing economies face starkly diverse cyclical positions and structural challenges.”
”In general, enhancing financial resilience can reduce the vulnerability to a tightening of global financial conditions, sharp currency movements, and the risk of capital flow reversals,” it said.
The report said countries that have large and increasing non-financial liabilities, unhedged foreign debts or those that heavily rely on short-term loans to finance long-term investments “must adopt stronger risk management practices and contain balance sheet mismatches.”
It explained that on the back of weak growth and limited policy space in many countries “continued multilateral effort is required in several areas to minimize risks to financial stability and sustain global improvements in living standards.”
”To share the long-term benefits of economic integration more broadly, policymakers must ensure that well-targeted initiatives are in place to help those adversely affected by trade opening and to facilitate their ability to find jobs in the sectors of the economy that are expanding,” it said.
Multilateral and national efforts are also needed to address tax evasion, it said.
Measures to ensure the resiliency of financial systems should continuously be put in place to address emerging risks from non-bank factors, it said.
”Last but not the least, multilateral cooperation is also indispensable to address important longer-term global challenges, such as meeting the 2015 Sustainable Development Goals, mitigating and coping with climate change, and preventing the spread of global epidemics,” it added.