MANILA (Mabuhay) — The Philippines has achieved a higher growth trajectory, an official of the International Monetary Fund said Wednesday, prompting the multilateral lender to raise its economic forecast for the Southeast Asian country amid cuts elsewhere.
“The economic growth momentum here is higher. The region has been softer than expected. Most countries’ (forecasts) were reduced but the Philippines is an outlier,” IMF resident representative Shanaka Peiris told reporters in an interview.
The Washington-based lender now expects the Philippine economy to grow 7 percent this year, from a 6 percent forecast last November.
The outlook is faster among the emerging markets which the Fund expects to expand by 5 percent this year and 5.4 percent next year.
“The global outlook is lower including other emerging markets,” said Peiris.
“But the Philippines, given the very strong growth in the first quarter and strong growth momentum for 2013, we raised it to 7 percent from 6 percent,” the official added.
The Aquino administration sees the economy growing by 6 to 7 percent for this year and 6.5 to 7.5 percent next year.
Domestic demand remains a strong driver, which allowed by output to grow by 7.8 percent in terms of gross domestic product during the first quarter, Peiris noted, saying remittances from overseas Filipinos will boost consumption. IMF saw money transfers expanding by 5 percent this year.
“Strong” state spending, especially on infrastructure, will also be a key driver, the IMF official said.
But Peiris raised a caveat, placing emphasis on much needed reforms to sustain the economy, particularly in maintaining the 7 percent growth.
“We can’t sustain growth without doing anything… so structural reforms are very important…,” he said, citing the rationalization of fiscal incentives and improving the business environment.
Increasing infrastructure spending to about 5 percent of the GDP is a must, Peiris added.
“Looking at other countries, what we found is that for this growth take off to be sustained, what you need is growth in investments,” the IMF official noted. Investments [in the Philippines] have picked up but still low,” he added. (MNS)