MANILA, Philippines – Multilateral lender International Monetary Fund (IMF) is confident the Philippine economy will continue to perform strongly as the country is expected to remain resilient despite external shocks this year.
An IMF mission led by Luis Breuer, which visited Manila from Feb. 20 to 24, said the country’s gross domestic product (GDP) growth would remain steady at 6.8 percent this year.
“The economic outlook continues to be favorable, although subject to external headwinds. In 2017, growth is projected at 6.8 percent on continued strong domestic demand and a mild export recovery,” the lender said in a statement.
The multilateral lender warned the higher GDP growth outlook is subject to downside risks including lower regional growth, capital outflows due to the normalization of interest rates by the US Federal Reserve as well as the heightened global policy uncertainty.
“Over the medium term, a continuation of sound macroeconomic policies and structural reforms would be important to sustain investor confidence and make growth more inclusive,” the IMF team said in a statement.
The team added key reforms include those aimed at raising productive investment, opening up the economy to greater competition and foreign investment, and reducing poverty such as by removing the quantitative restrictions on rice imports.
Economic managers penned a GDP growth target of between 6.5 and 7.5 percent for this year.
The country’s GDP growth accelerated to 6.8 percent last year from 5.9 percent in 2015 amid strong domestic demand and higher investments reflecting higher public infrastructure spending and private construction.
The Duterte administration has raised its budget deficit cap to three percent of GDP instead of two percent as it intends to ramp up infrastructure spending.
The team that met with Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. and other economic managers, senior government officials, and private sector representative said upside risks including higher commodity prices, pass through from currency depreciation, and strong economic activity are seen pushing inflation to 3.6 percent this year from 1.8 percent last year.
The BSP has set an inflation target of two to four percent between 2017 and 2020.
It added upside risks to economic growth include a faster pace of budget execution and higher global growth.
The IMF said the passage of the first package of the Comprehensive Tax Reform Program (CTRP) is critical to sustain the rise in expenditures targeted in the medium term fiscal framework.
“Fiscal policy is appropriately focused on the medium-term objectives of addressing the infrastructure gap and inequalities and should be supported by public financial management reforms,” it added.