The International Monetary Fund (IMF) reiterated its confidence in the Philippine economy’s strength and ability to withstand upcoming global headwinds for the year and the next.
In the conclusion of its 2017 Article IV Consultation with the Philippines, the global monetary authority said the local economy continued to perform well in 2017, giving it the confidence to retain its 6.6-percent growth projection for the country for the year.
The Article IV Consultation is an annual health check for the IMF’s country-partners worldwide to assess economic progress, as well as to spot potential problems for a particular economy.
“The strong performance of the economy has continued, with rapid economic growth and low inflation. Economic growth is projected to remain high, supported by robust domestic demand, while inflation is expected to remain near the center of the target band,” the IMF said.
The IMF also expressed support to the government’s initiatives to expand the productive capacity of the economy, including its ramped up infrastructure spending, as well as the pending approval of the tax-reform package.
“Staff supports ongoing reforms aimed at lowering poverty and maximizing the demographic dividend. The authorities are appropriately focusing on investing in infrastructure and human capital, reducing regional disparities, eliminating quantitative restrictions in rice imports and improving access to finance, including through capital-market development,” the IMF said.
However, while painting a rosy picture of the Philippine economy, the IMF warned of certain sectors that may stall the country’s growth down the line.
Among these areas of concern include the ongoing high credit growth and loan concentration in the country.
“High credit growth, especially to the real-estate and household sectors, merit continued monitoring. In addition, some conglomerates and real-estate developers have leveraged significantly, while shadow-banking activities have expanded,” the IMF said.
“The conglomerate structure and data gaps generate challenges to measure concentration, but capital-market development could help reduce bank-loan concentration by diversifying the sources of funding for large conglomerates. Staff supports the authorities’ efforts to have legal access to information on conglomerates’ finances,” it added.