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By Maricel E. Burgonio, Reporter
THE International Monetary Fund (IMF)
cut its growth projections for developing economies, due to rising
inflation and a US slowdown.
In its World Economic Outlook
update, the IMF projected emerging and developing economies’ gross
domestic product (GDP) growth to decelerate to around 7 percent this
year from 8 percent last year.
“Inflation is a rising concern
and will constrain the policy response to slower growth,” the
so-called world’s lender of last resort said.
It raised its inflation forecast
for the emerging and developing economies by more than 1.5
percentage points to 9.1 percent this year and 7.4 percent next
year.
The IMF said commodity prices,
particularly those of fuel and food, have surged since the release
of its forecast in April.
The Washington-based lender said
central banks have expressed increasing concerns about the increase
of inflation. It said monetary policy has to be tightened combined
with greater fiscal restraint and with more flexible exchange rate
management, to reverse the recent build up in inflation.
Due to high inflation, IMF noted
signs of weakening business activity in emerging economies.
For the Philippines, inflation
accelerated to a 14-year high of 11.4 percent last month, leading
the Bangko Sentral ng Pilipinas (BSP) to hike its key policy rates
by 50 basis points. The BSP also raised its inflation forecast to a
range of 9 percent to 11 percent this year, from an earlier estimate
of 7 percent to 9 percent.
The IMF said price pressures are
unlikely to abate in the foreseeable future, suggesting governments
should find ways to address inflation without also feeding inflation
or depleting foreign exchange reserves.
For the Association of South East
Asian Nations (Asean)-5 group, the IMF projected slower GDP growth
of 5.6 percent this year from 6.3 percent last year.
Its outlook on the global economy
points to a lower 4.1-percent expansion this year from 5 percent
last year.
“Recent indicators suggest a
further deceleration of activity in the second half of the year,”
the IMF said, adding business and consumer sentiment have continued
to retreat while industrial production has weakened further.
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