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IMF raises Philippines GDP forecast
Yongzheng Yang, resident representative to the Philippines of IMF, said the latest gross domestic product (GDP) growth projection for the Philippines is subject to uncertainty amid the rising number of COVID-19 infections over the past few weeks.
Miguel De Guzman, file

IMF raises Philippines GDP forecast

Lawrence Agcaoili (The Philippine Star) - April 7, 2021 - 12:00am

MANILA, Philippines — The International Monetary Fund (IMF) has raised its 2021 economic growth forecast for the Philippines to 6.9 percent from the original target of 6.6 percent, the fastest among members of the Association of Southeast Asian Nations (ASEAN).

Yongzheng Yang, resident representative to the Philippines of IMF, said the latest gross domestic product (GDP) growth projection for the Philippines is subject to uncertainty amid the rising number of COVID-19 infections over the past few weeks.

“Nevertheless, the growth forecasts are subject to substantial uncertainty. In particular, recent hikes in virus infections pose a significant downside risk, as tightening quarantine measures could dampen economic activity. We are keeping a close eye on virus developments,” Yang said in an email.

COVID-19 cases in the Philippines breached the 800,000 level last month as daily cases hit a record high of 15,310 last April 2, with deaths nearing 13,500.

This prompted the government to place the National Capital Region (NCR) and nearby provinces under enhanced community quarantine from March 29 to April 11 to slow the spread of the virus.

The IMF’s latest growth projection for the Philippines was faster than Vietnam’s and Malaysia’s 6.5 percent, Indonesia’s 4.3 percent and Thailand’s 2.6 percent.

The multilateral lender slashed its GDP growth forecast for the ASEAN to 4.9 percent from the earlier forecast of 5.2 percent for this year

“On the growth forecasts, it’s helpful to note that the Philippine economy ended 2020 with stronger-than-expected growth in the fourth quarter. This momentum signals a stronger recovery this year,” Yang said.

The IMF also noted the impact of the fiscal stimulus of the national government under Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan 2).

“The increased fiscal stimulus in the 2021 budget should also help boost economic activity. Taking into account the unused Bayanihan 2 funds to be disbursed this year and carry-over funds from the 2020 budget, government spending in 2021 is likely to be higher than anticipated in our January WEO forecasts,” Yang said.

Economic managers, through the Development Budget Coordination Committee (DBCC), expect a GDP growth of 6.5 to 7.5 percent for this year and eight to 10 percent for next year.

For 2022, the IMF retained the GDP growth forecast for the Philippines at 6.5 percent, the second-fastest in the ASEAN after Vietnam’s 7.2 percent, but faster than Malaysia’s six percent, Indonesia’s 5.8 percent and Thailand’s 5.6 percent.

The IMF sees inflation accelerating to 3.4 percent this year before easing to three percent next year. Inflation averaged 4.5 percent in the first quarter after easing to 4.5 percent in March from 4.7 percent in February.

The Bangko Sentral ng Pilipinas (BSP) said inflation is expected to remain elevated until the third quarter before easing in the fourth quarter due to the impact of supply-side constraints such as weather-related disturbances and the African swine fever (ASF) on food prices particularly meat and higher oil prices.

The IMF also expects the country’s unemployment rate improving to 7.4 percent this year and 6.3 percent next year.

“With continued macroeconomic support, the job market should continue to improve over time along with economic activity. To stay on this positive path, it is critical that the rising coronavirus infections are brought under control soon, including by accelerating vaccinations and strengthening containment measures in the country,” Yang said.

The IMF also hiked its global GDP growth forecast to six percent from the original target of 5.5 percent for 2021.

“Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis,” the IMF said.

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