IMF lowers growth forecast for the Philippines

MANILA, Philippines - The International Monetary Fund (IMF) cut its growth expectations for the Philippines, citing a “more challenging" outlook this year. After predicting that the Philippines will expand by 2.9 percent this year, the country – one of Southeast Asia’s fastest-growing nations in 2007 – will only grow by 2.25 percent in 2009. Despite lower expectations, the Washington-based agency said that the Philippines will grow by four percent in 2010. “Growth is now projected at 2.25 percent in 2009 and four percent in 2010. This markdown reflects our latest assessment that world growth will come to a virtual standstill in 2009," Dennis Botman, the IMF’s newly-installed resident representative said at a Wednesday briefing. The briefing is part of the IMF’s World Economic Outlook. The IMF’s reduced economic projections for the Philippines remained smaller compared to its peers “owing to relatively robust domestic demand and a more muted impact of the crisis on net exports," Botman said. Although the Philippines grew an average of 4.6 percent last year, this was way below the 7.2 expansion reported in 2007, reportedly the country’s highest growth in three decades. During the same briefing, Botman also expressed pessimism about the country’s balance of payments, the total amount of foreign exchange earnings left after foreign expenses are subtracted. The Philippines’ BOP may end up with a $500 million BOP deficit this year, instead of the $2 billion surplus that the Bangko Sentral ng Pilipinas (BSP) is expecting. An estimated $1.3 billion worth of portfolio funds – cash invested in local stocks and bonds – have already left the country, prompted by investors and fund managers’ risk aversion, Botman said. He added that BOP’s surplus contracted to $89 million, a far cry from 2007’s $8.557 billion surplus. These dim expectations notwithstanding, Botman remained confident that the Philippines will be able to survive the worldwide financial storm since it adopted economic reforms early on. “Looking forward, fiscal policy will need to walk a fine line between supporting growth while capping the deficit at two percent of GDP to entrench investor confidence," Botman said. Under its current fiscal program, the Philippine government should only incur a deficit no larger than P102 billion. - GMANews.TV