The International Monetary Fund on Tuesday reduced its 2017 growth forecast for the Philippines to 6.6 percent from an earlier estimate of 6.8 percent on slower-than-expected expansion of 6.4 percent in the first quarter.
IMF mission chief Luis Breuer, who visited Manila on July 26 to Aug. 9, said the 2018 growth projection was also cut to 6.8 percent from 6.9 percent previously.
“Basically, growth in the first quarter was lower than anticipated. During the electoral cycle, there was higher spending,” Breuer said in a briefing at the Bangko Sentral after the completion of the 2017 Article IV Mission.
Breuer said despite the reduced growth forecasts, the country’s economic growth was seen “to remain close to potential at 6.6 percent in 2017 and 6.8 percent in the medium term, supported by robust domestic demand and recovery in exports.”
“Inflation is projected at the center of the target band [2 percent to 4 percent] in 2017-18, reflecting stable commodity prices and a near-zero output gap,” he said.
The government set a gross domestic product growth target of 6.5 percent to 7.5 percent this year. The first-quarter GDP grew 6.4 percent, amid sluggish spending which was comparatively strong in the run-up to the presidential a year ago.
The IMF team met with Bangko Sentral Governor Nestor Espenilla Jr., the secretaries of economic cluster, senior government and local government officials, private sector representatives and the financial community.
Breuer said structural reforms would be essential to sustaining rapid inclusive growth to significantly lower poverty and maximize the demographic dividend in the Philippines
He said the comprehensive tax reform program was a very important initiative of the state because it would generate revenues for priority projects, particularly those pertaining to social services and infrastructure.
Budget Secretary Benjamin Diokno welcomed the multilateral lender’s favorable affirmation of the performance and growth outlook of the Philippine economy.
“Rest assured that the Department of Budget and Management remains steadfast in its commitment to promote rapid and equitable growth in line with the Duterte Administration’s development objectives,” Diokno said.
“I note that the IMF has recognized the structural reforms that we have introduced such as the tax reform program, the National Government Rightsizing Program and the Budget Reform Bill. They will improve the functioning of the public sector and boost the Philippine economy’s growth trajectory,” said Diokno.
He said the National Government Rightsizing Program aimed to enhance government’s capacity and streamline the functions of the bureaucracy for more efficient public service delivery.