PH growth forecasts revised by IMF, AMRO

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Growth forecasts for the Philippines have been revised anew, with the International Monetary Fund (IMF) trimming its 2018 forecast and an Asean+3 think tank doing the same for its 2017 projection.

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In the October update of its “World Economic Outlook” report, the IMF said the Philippine economy, as measured by gross domestic product (GDP), would still grow by 6.6 percent this year, “partly because of stronger-than-expected external demand from China and Europe.”

For 2018, however, the IMF trimmed its growth projection to 6.7 percent from 6.8 percent.

“The small downward revision for the 2018 growth forecast to 6.7 percent is in line with a steady growth path, given the likely growth outcome for 2017,” IMF Resident Representative to the Philippines Yongzheng Yang told reporters in an e-mail.

“It should be noted that this rate remains one of the fastest growth rates in Asia,” Yang added.

AMRO revision

Also yesterday, the Asean+3 Macroeconomic Research Office (AMRO) cut its 2017 growth forecast for the Philippines on account of a first half slowdown.

“The Philippine economy is expected to grow by 6.6 percent this year before quickening to 6.8 percent in 2018 as public sector infrastructure spending gains pace while domestic consumption and exports remain buoyant,” AMRO lead economist Sumio Ishikawa said in a statement.

AMRO, which earlier projected a 6.8 percent expansion for 2017, noted that “after the boost from elections related spending in 2016, the pace of economic expansion moderated to 6.4 percent in the first half of 2017 as fixed investment decelerated.”

Both the AMRO and IMF forecasts for 2017 are is lower than the actual GDP growth of 6.9 percent last year but remain within the government’s 6.5 percent to 7.5 percent target.

The Philippine economy grew by 6.5 percent in the second quarter, picking up from the 6.4 percent recorded in the first three months of the year but down from the 7.1 percent posted a year earlier.

Year to date growth, at 6.4 percent, remains below target.

Outlook still optimistic

“We see continued robust domestic demand driven by investment and consumption, and fiscal policy is supportive of growth. Hence no change to our forecast,” Yang said of the IMF’s 2017 estimate.

In August, the IMF had said that the Philippines remained an economic standout amid global uncertainties, supported by robust domestic demand and recovery in exports.

AMRO, meanwhile, noted that private consumption growth had slowed but nonetheless remained robust, supported by gains in employment and sustained remittance inflows.

Government disbursement was weak in the first quarter but improved in the second quarter, while the trade deficit eased in the first half of 2017 as exports outpaced imports for the first time since the first quarter of 2015.

“Both private consumption and exports are expected to remain buoyant going forward, while hurdles to budget execution are also gradually being overcome,” AMRO said.

However, it noted that failure to accelerate infrastructure investments through the “Build Build Build” program owing to, among others, absorptive capacity constraints of the government and private sector participants could dampen investment activity and undermine growth prospects.

A delay in infrastructure projects execution also risks having the additional revenues from the comprehensive tax reform program being diverted to other expenditure items with little growth potential, it added.

“Overall, the Build, Build, Build program should be implemented with a view to boosting growth while keeping the current account and fiscal deficits at moderate levels,” it said.

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