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THE International Monetary Fund (IMF) expects the
Philippine economy to grow slightly below the government target this
year.
In a speech, Rodrigo de Rato, IMF
managing director, said the country’s economy, as measured by its
gross domestic product (GDP), would grow 6 percent, or below the low
end of the government’s goal.
The government set a growth
target range of between 6.1 percent and 6.7 percent this year. The
economy grew 5.4 percent last year.
“We expect the Philippines to
grow at rates close to 6 percent in 2007 and 2008,” Rato said.
He said emerging economies such
as the Philippines don’t consider the United States as its major
market, as the world’s biggest economy is expected to grow a
slower 2 percent this year and contribute 15 percent to global
expansion.
Rato said there is potential
instability from capital inflows, which can complicate macroeconomic
management and expose the beneficiary countries to an abrupt
reversal of flows when sudden shocks occur.
“The best macroeconomic policy
response is to pursue exchange rate flexibility with limited
intervention aimed at smoothing volatility in the exchange
markets,” he said.
Also, Rato cited fiscal
tightening and reducing inflationary pressures which can reduce
vulnerabilities by limiting debt accumulation.
“Improving the domestic
financial framework is important because countries receiving capital
inflows are least likely to experience instability if their
financial structure is strong,” he said.
The Philippines has been among
the major beneficiaries of strong capital flows, leading the Bangko
Sentral ng Pilipinas (BSP) earlier to impose measures that would
contain any inflationary pressures. The BSP also said it would relax
policies aimed at allowing greater outflow of foreign exchange.
In line with the high global oil
prices, Rato said it is important to implement policies that will
curtail demand and improve energy efficiency, which will lead to
higher balance of payments (BOP) surpluses. The BOP measures a
country’s economic transactions with the rest of the world, with a
surplus viewed positively as this means the country is earning more
dollars than it is giving up.
The IMF suggested that
governments reduce subsidies and tax exemptions for energy and
replace them with targeted assistance to citizens most affected by
high prices.
“The danger posed by climate
change underlines the importance of curtailing demand for energy
products over the long term, either through higher carbon taxes or
the introduction of a broad system of tradable permission
permits,” he said.
Rato added that the emerging
economies still have high poverty levels. In the Philippines, about
30 percent of people lived in poverty, based on latest National
Statistical Coordination Board data.
“We also need to make sure that
the fruits of growth are widely shared and that the poorest people
are protected from the costs of adjustment,” he said.
--Maricel E. Burgonio
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