MANILA, Philippines - The Philippines could buck the trend of slowing growth in Southeast Asia, with robust domestic demand and credit growth fuelling faster economic expansion this year and the next, the International Monetary Fund (IMF) said.
Growth could hit seven percent this year before slowing down to six percent in 2014, IMF resident representative Shanaka Jayanath Peiris told reporters in a briefing on Wednesday.
The latest forecasts were faster than the six percent and 5.5 percent for both years seen since last November and took into consideration the “very strong” 7.8 percent first-quarter uptick that beat market expectations.
The Aquino administration has targeted growth at six- to seven-percent this year and 6.5-percent to 7.5-percent in 2014.
“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,” Peiris said.
On Tuesday, the Washington-based multilateral lender released its World Economic Outlook Update that showed slowing emerging markets growth pulling down global growth this year and the next.
Emerging economies could grow five percent this year and 5.4 percent next year, slower than the 5.3 percent and 5.7 percent projected last April.
Under this, the so-called Asean-5— Indonesia, Malaysia, the Philippines, Singapore and Thailand— could expand 5.6 percent in 2013 and 5.7 percent in 2014, down from 5.9 percent seen for both years originally.
While the IMF tagged a slowing credit growth and weak trade for the region, Peiris said the local economy could get some support from its “robust consumption” on the back of “resilient” remittance inflows.
Remittances from overseas Filipinos could grow five percent this year, he said, meeting the central bank’s forecast. This, in turn, could drive the current account and over-all balance of payments (BOP) to surplus.
As of April, the Bangko Sentral ng Pilipinas (BSP) said remittances grew 5.7 percent, while the BOP— a summary of all inflows and outflows— hit $1.884 billion surplus as of April, indicating huge dollar inflows.
Purchasing power could also get a lift from slow inflation, projected to hit the “low-end of the band of the central bank target” at three- to four-percent. Inflation settled at 2.9 percent in the first half.
For 2013, Peiris said the first half economic growth would likely be “stronger” than the second half as the government frontloaded most of its spending to take advantage of good weather.
“For next year, from our point of view, there’s this base effect this year,” which could slow the expansion to the “trend growth” of six percent, Peiris explained.
To be able to go beyond the trend, the IMF official said it would be important to attract more foreign direct investments (FDI), increase infrastructure spending and improve the business climate.
A “second wave” of “structural reforms” should also be pursued, Peiris said, pointing to the rationalization of fiscal incentives and mining taxation.
“You want all these…to improve so that you create more jobs for a younger population,” he said.