|
THE
International Monetary Fund (IMF) has scaled back the
country’s growth potential this year from the original
forecast of 5.8 percent in gross domestic product (GDP)
to 5.2 percent.
In an
e-mailed message Sunday, the IMF gave reporters the new
economic growth forecast for the Philippines.
The new
numbers came in the wake of a one-week visit to Manila
by IMF representatives.
During
the visit, which ended on Friday, team leader Il Houng
Lee exchanged views with Bangko Sentral ng Pilipinas (BSP)
Governor Amando Tetangco Jr. and Finance Secretary
Margarito Teves.
Lee said
the local macroeconomic environment is becoming “more
challenging” than in the past.
“On the
back of slowing external demand and softening
consumption indicators, the economy is likely to grow
5.2 percent in 2008,” he added.
“Meanwhile, inflation is expected to remain close to
double-digit levels in the coming months as the recent
increases in food and fuel prices filter through to the
consumer price index,” Lee said.
His
growth forecast for the Philippines is significantly
lower than the official forecast ranging from 5.7
percent to 6.5 percent this year.
The
official forecast incorporates the impact on the economy
of a global economic slump and soaring food and fuel
prices.
He
expected inflation to approach the double-digit level in
the next few months as price increases in food and fuel
filter through the consumer price index (CPI).
Tetangco
earlier acknowledged that inflation will range “in the
low teens” in June and likely hit 10 percent to 11
percent by the third quarter versus 9.6 percent in May.
Soaring
inflation worries the IMF because emerging economies
like the Philippines affect the poorer sectors the most,
food being close to 10 percent of the CPI in the case of
the Philippines.
“Inflation takes a heavier toll on the poor than the
average household since food expenditure constitutes a
much larger share of the poor’s household expenditure,”
the IMF official said.
He
lauded the BSP for “appropriately recalibrating its
monetary stance” by adjusting its policy rates 25 basis
points up early this month and declaring a commitment to
act “as and when necessary to address the threat of high
inflation.”
His
statement came on the heels of deputy IMF managing
director Haruhiko Kuroda’s comments that the BSP’s
response to the inflation challenge was rather “behind
the curve.”
He also
expressed support for increased social expenditures
targeted at the poor, while emphasizing the need to
protect next year’s budget program.
“The
recent reduction in public debt, from about 100 percent
of GDP in 2003 to 62 percent in 2007, has provided some
scope for increased social spending.
“The
additional spending should be limited to well-targeted
schemes for protecting the poor, such as through
well-designed conditional cash transfer schemes.
“Limiting the deficit and increasing the tax effort to
secure revenue will assure investors that the
Philippines remains committed to medium-term fiscal
consolidation,” Lee said.
For this
reason, he said it should be harder for the government
to limit next year’s deficit goal to one-half percent of
GDP as programmed and urged the adoption of tax measures
to compensate.
“It is
therefore imperative to adopt legislative measures as
early as possible to reform fiscal incentives and
excises and to find other resources, such as from
accelerating tax-administration reform, to protect the
2009 fiscal program,” he said. |
