IMF joins other multilateral bodies in cutting Philippine growth outlook

THE International Monetary Fund (IMF) has also tempered its growth forecast for the Philippines this year, in the face of a projected drop in world output.

In its World Economic Outlook (WEO) report published on Tuesday, the IMF now sees the Philippine economy growing by 6.5% this year, slower than the 6.6% forecast given in 2018.

This mirrors scaled-down estimates given by other multilateral organizations earlier this month, and falls within the government’s lowered 6-7% target. The growth pace also compares to 2018’s 6.2% expansion.

The IMF’s estimate matches the rate given by the United Nations Economic and Social Commission for Asia and the Pacific (UN/ESCAP), and is faster than the downward-revised 6.4% forecast given by the World Bank and the Asian Development Bank last week. It also compares with 6.5% this year and 6.4% next year given last January by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development and the five UN regional commissions (including UN/ESCAP) in their joint World Economic Prospects 2019 report. The other multilateral bodies cited stronger growth in private consumption amid slower inflation, even as they cautioned some easing in government spending given delays in enactment of the P3.757-trillion 2019 budget.

According to the IMF, the Philippines will remain a growth leader in the region alongside Vietnam among the ASEAN-5. Growth for the sub-region — which also includes Indonesia, Malaysia and Thailand — has been retained at 5.1% this year and 5.2% for 2020, beating the trend as most forecasts were slashed. However, this will mean that growth will ease from 2018’s 5.2%.

The Philippines will later on emerge as the fastest-growing in the group, with the IMF pencilling in a 6.6% climb in 2020. Demand conditions are seen assisted by softer inflation, with overall price increases seen softening to 3.8% from last year’s 5.2%. Next year, inflation is seen to drop further to 3.3%, both well within the central bank’s 2-4% target.

Meanwhile, the country’s current account balance is seen at a narrower deficit. From an equivalent of 2.6% to gross domestic product (GDP), the gap is expected to narrow to 2.2% of GDP this year and then to 1.8% of GDP next year.

For the rest of the world, the IMF is seeing a rebound in market sentiment following some easing in the “tight” financial conditions experienced late 2018, as many central banks raised interest rates then.

However, concerns about a global slowdown persist.

“Industrial production figures and surveys of purchasing managers suggest that the slower momentum in global growth during the second half of 2018 is likely to continue in early 2019,” the global lender said.

Global growth is seen easing to 3.3%, down from the January forecast of 3.5% and slower than the 3.6% climb posted in 2018. However, world output is seen to bounce back to 3.6% in 2020.

“The retreat in part reflects the anticipated negative effects of the tariff increases enacted in 2018,” the IMF said, referring to the unresolved trade tensions between the United States and China coupled with the unwinding of their fiscal stimulus.

For the Euro area, growth is seen slowing amid softer household spending and “prolonged uncertainty” about the United Kingdom’s exit from the European Union.

Growth among advanced economies is seen easing to 1.8% from 2.2% last year, while expansion of emerging markets is seen softer at 4.4% from the 4.5% estimate under the latest WEO Update.

Over the medium term, the IMF sees global growth hitting a plateau at 3.6% as advanced economies see softer expansion while emerging markets “stabilize.”

“The medium-term growth forecast incorporates continued strong investment growth in emerging market and developing economies, accounting for more than one-third of their GDP growth rate during the projection horizon,” the report also read.

During the IMF’s annual health check on the Philippines in 2018, its team confirmed “strong” economic performance despite rising inflation and a “less favorable” external environment. — Melissa Luz T. Lopez