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By Maricel E. Burgonio, Reporter
The International Monetary Fund (IMF)
revised downward its economic-growth forecast for the Philippines
for 2008 and further lowered it for 2009, adding that the US
financial turmoil would further decelerate economic activities in
the Philippines.
The IMF’s World Economic
Outlook update projected the growth of the Philippines’ gross
domestic product (GDP) at 4.4 percent this year, from the July
forecast of 5.2 percent. Such growth is the lowest among the
Philippines and four other member-countries of the Association of
Southeast Asian Nations (Asean)—Indonesia, Malaysia, Thailand and
Vietnam. But the forecast is within government’s lower-end GDP
growth forecast of 4.4 percent to 4.9 percent for 2008.
For 2009, the IMF expects the GDP
growth to further decline to 3.8 percent, which is below
government’s forecast of between 4.1 percent and 5.1 percent. GDP
is the total value of goods and services produced in a country in a
year.
The economies of the five Asean
countries, it said, are projected to grow 5.5 percent this year and
4.9 percent next year. In most countries, the IMF added, domestic
demand is weakening rapidly and some policy tightening had taken
place. Asean also groups Brunei, Cambodia, Laos, Myanmar and
Singapore.
“A major policy dilemma
for the region is how to respond to the weakening growth outlook and
global financial turbulence, without losing sight of inflation
risks,” it said.
Global growth is also expected to
moderate to 3.9 percent in 2008, from 5 percent in 2007, and further
weaken to 3 percent in 2009, its slowest pace since 2002.
Financial markets weakened in
recent months, driven by increasing concerns about the global
outlook and declining investor risk appetite, particularly in the
context of the September market turbulence that saw big investment
banks in the US filing for bankruptcy.
Domestic demand
The domestic demand, the IMF
said, had softened, with rising food and fuel prices starting to
weigh on consumption. Declining profit margins and weakening demand,
it added, have prompted firms to scale back their investment plans.
The IMF said that financial
stress could remain very high and that credit constraints from
deleveraging could be deeper and more protracted.
“Additional credit losses are
very likely as the global economy decelerates. In this setting,
financial institutions’ ability to raise new capital will remain
very challenged,” it added.
Inflation forecast
The IMF projected inflation to
increase to 10.1 percent in 2008 and to decline to 7 percent in
2009.
These forecasts are within the
Bangko Sentral ng Pilipinas’ 9 percent to 11 percent this year and
6 percent to 8 percent next year.
In Asia, monetary authorities
have tightened interest rates as the first line of defense against
rising inflation. The IMF, however, said that it may need to be
complemented in some cases by greater exchange-rate flexibility or
fiscal action.
“Fiscal restraint could help
reduce inflation pressures, especially in countries where rising
food and fuel subsidies, as well as public-wage increases, have
weakened fiscal positions and contributed to price pressures,” it
added.
Recovery in 2009
The IMF said gradual economic
recovery is also expected in the latter part of 2009, when oil
prices are seen to stabilize and boost consumption in oil-importing
countries.
Also in 2009, the US housing
sector is also expected to finally bottom out and emerging economies
to provide a source of resilience as a result of strong productivity
growth and improved policy frameworks.
The Philippines’ economic
growth is driven mainly by exports earnings, which have been
declining since the US mortgage crisis emerged this year.
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