IMF: Well-managed budget to fuel PHL growth

"Moderately stronger" growth of 4.2 percent will result from "improving the alignment of funds and sharper accountability" in spending the P1.8-trillion 2012 budget, the International Monetary Fund (IMF) said on Monday in a media briefing at the Bangko Sentral ng Pilipinas (BSP).   IMF mission chief Vivek Arora said they expect the growth to come largely from public spending and that the "quality" of the fiscal outlays will be more effective "once the new budget processes are in place."   The IMF official said among the improvements in the budget is clarity "when funds are assigned, there is a program of work."   Arora also said the national government budget is consistent with the Philippine Development Plan (PDP), which he praised for enhancing spending on education, health, and other social sectors.   "Expenditure is appropriately reoriented toward social and infrastructure priorities for inclusive growth. Higher revenue will be needed in order to meet these objectives," the IMF mission said in its prepared statement.   "The authorities' emphasis on strengthening tax compliance is appropriate and the Fund continues to support these efforts with technical assistance. In addition, it will be important to reform excises, rationalize fiscal incentives, and broaden the tax base," the IMF team also said.   Arora said that they expect domestic demand and consumer spending to remain resilient because of the underlying factors such as overseas remittances and appropriate monetary policies.   "The policy conditions are supportive of growth," Arora noted. 'Fragile global environment'   "GDP growth slowed in the first three quarters of 2011 owing to a fall in semiconductor exports and a temporary fall in public investments as new practices are put in place to improve the transparency and efficiency in government expenditure," Arora stressed.   "The Philippines is being affected along with other countries in the region by the fragile global environment, but macroeconomic conditions remain generally sound," Arora added.   Developments in gross domestic product — in global terms — were influenced by a combination of significant changes, the IMF official noted. “…[One] is that developments in the economy in second and third quarters have been relatively weak and the global environment has become less optimistic.   The challenge for the Philippines is how to swim through the period of global uncertainty while maintaining macroeconomic stability and building the foundations for faster and growth that is more inclusive.   "The key feature of this outlook is the global environment. We see downward risk at this point. The outlook in global economy is sluggish. We don't expect much support on external demand but we feel that domestic demand will offset the effects of external demand next year," he said.   Inflation will remain within the 3-percent to 5-percent target set by the Bangko Sentral this year and next year while the country's external payments position including the balance of payments (BOP) surplus will stay strong, the IMF official noted.   "The authorities' policy management is supporting confidence and has built up room for a strong response should further negative shocks occur," Arora said.   At this point, there is no need for the central bank to tinker with interest rates, considering that Philippine monetary conditions allowed the system to absorb the global developments and stayed supportive of growth, the IMF team noted in its statement. — VS, GMA News