The International Monetary Fund (IMF) has lifted its growth outlook for the Philippine economy this year to 6.3 percent on the back of reconstruction efforts in typhoon-affected areas.
In a press briefing on Wednesday, IMF Resident Representative to the Philippines Shanaka Jayanath Peiris said that the multilateral agency’s gross domestic product (GDP) growth outlook for the country is an upward revision to its earlier forecast of 6 percent in September 2013, as government spending is seen to ramp up spending particularly for the reconstruction efforts in typhoon-affected areas.
“You have the effects of [Super Typhoon] Yolanda which somewhat negative, but we also think that the impact is relatively limited because the region has a small share on GDP, but the reconstruction may have a fairly positive impact on fiscal stimulus. Balancing those factors, we have 6.3 percent [projection],” Peiris explained.
Peiris also said that the outlook is based partly on slightly better advanced economy outlook, which will boost the external sector of the country.
In its World Economic Outlook Update, the IMF said that global growth is now projected to be slightly higher in 2014, at around 3.7 percent, rising to 3.9 percent in 2015 as financial conditions in advanced economies have eased, with little change since the announcement by the United States Federal Agency of the tapering its bond-buying program.
Meanwhile, overall growth in emerging market and developing economies including the Philippines is expected to increase to 5.1 percent in 2014 and to 5.4 percent in 2015.
However, the IMF’s growth outlook for 2014 was lower compared to its growth outlook for the country in 2013 which was at 6.8 percent, as well as the government’s 6.5 percent to 7.5 percent target for 2014.
“We have 6.3 percent this year because last year’s [growth]is so high especially in the first quarter, which means that the base effect to this year is negative. The economy is actually growing at a growth momentum of between 6.5 percent and 7 percent but because of the base effect next year, this year will be a bit lower,” the IMF representative said.
Peiris further said that the growth momentum of the economy is around the range of the government forecast, especially now that the reconstruction plan for the typhoon-affected areas have been laid out.
“Growth could be anywhere between 6.5 and 7 percent if the spending for Yolanda reconstruction goes according to plans . . . It’s all about fiscal spending,” he said.
In the P2.265-trillion 2014 national budget, the government created a P100-billion rehabilitation and reconstruction fund dedicated to the typhoon-affected areas.