Domestic demand to drive growth next year

MANILA, Philippines - Domestic demand for goods and services is seen to drive the Philippines’ economic growth next year, hopefully offsetting losses arising from the country’s lower exports, the International Monetary Fund (IMF) said. With declining global trade resulting from the worldwide credit crunch, “exports of the region will necessarily slow," IMF senior advisor Jerald Schiff said in a teleconference with reporters. “We never actually expected the region to decouple," Schiff said, pointing out that export-oriented trade has been the growth drivers of many Asian economies. The IMF already predicted that Philippine export growth will be sluggish, no thanks to weaker demand from its major trading partners including the United States and Japan, the world’s largest and second-largest economy respectively. This expectation has been downplayed by the country’s economic managers, pointing out that the country has reduced its dependence on US exports. The IMF added that the increase in domestic demand is seen to be brought about by lower oil prices, which cut costs of goods and services. Schiff added that domestic demand could also be stimulated by government. “I think it's an open question as to how strong domestic demand can be when exports are declining, and that certainly represents an important risk to our projections," he said. The IMF also lowered its economic projections for the country, adding that Manila should strike a balance between spending for infrastructure and striving for a balanced budget by 2010. “For 2009, the key challenge for fiscal policy is to balance the need for cushioning the impact on the real sector against the benefits of maintaining fiscal discipline," IMF mission chief Il Houng Lee said in an earlier press conference. The IMF expects the Philippines to grow by 4.4 percent this year. Its projections for next year were cut to anywhere from 3.8 percent to 3.5 percent. - GMANews.TV