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Wednesday, April 21, 2010

April 22, 2010 Major News Stories



IMF upgrades RP growth outlook to 3.6 percent

The International Monetary Fund (IMF) has again upgraded the Philippines growth outlook, but it expects the country to still trail behind its neighbors in Southeast Asia this year.

In its latest World Economic Outlook, the IMF said it expects the Philippine economy to grow by 3.6 percent this year from the previous 3.2-percent forecast as a result of improving private investments that would boost private consumption.

The growth forecast is slower than 6.5 percent for Taiwan, 6 percent each for Indonesia and Vietnam, 5.7 percent for Singapore, 5.5 percent for Thailand and 4.7 percent for Malaysia.

"The ASEAN-5 economies are projected to grow by 5.5 percent in 2010. Private domestic demand is expected to be the main driver of growth, with net exports playing a lesser role than in the past, reflecting stronger imports relative to historical standards," the multilateral lender added.

The IMF stated in the report that higher investment inflows would help boost private consumption.

"For many [Association of Southeast Asian Nations] economies, notably the Philippines, Thailand and Malaysia, improving the environment for private investment can play an important role in boosting private domestic demand," the Washington-based lender said.

Exchange rate flexibility would also boost the purchasing power of consumers.

"Greater exchange rate flexibility in many economies would also facilitate rebalancing by raising households purchasing power and helping shift productive resources from the tradable to the nontradable sector," it said.

The IMF forecast is within the governments 2.6-3.6 percent target, and faster than the World Banks 3.5-percent projection but slower than 3.8 percent from the Asian Development Bank.

For next year, the IMF said Philippine economic growth would improve to 4 percent still slower than Vietnams 6.5 percent, Indonesias 6.2 percent, Thailands 5.5 percent, Singapores 5.3 percent and Taiwans 4.8 percent.

The lender likewise expects inflation to average at 5 percent this year and 4 percent next year.

The IMFs inflation forecast is within the central banks 3.5-5.5 percent goal this year and 3-5 percent next year.

The IMF noted that despite the countrys relatively stronger fiscal response last year, few Asian economies appear to face debt sustainability challenges on a scale similar to those faced by a number of developed countries.

The government hopes to trim the budget deficit to P293 billion or 3.5 percent of economic output this year after a record P298.5 billion or 3.9 percent of output last year.

The National Government has set aside P100 billion to stimulate the economy this year after spending P330 billion under the Arroyo administrations so-called economic resiliency plan that cushioned full impact of the global economic slump.

The central bank, in a bid to boost liquidity, also cut benchmark interest rates by 200 basis points between December 2008 and July 2009, bringing the overnight borrowing rate to a record low of 4 percent.

"With regard to monetary policy, it may not be too early to start unwinding the stimulus if output gaps are closing and inflation pressures are beginning to emerge," the IMF said.

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