IIF Sees Sustained Philippine Expansion
MANILA, Philippines — The Institute of International Finance (IIF) is projecting that the Philippine economy would grow 5.8 percent this year and 7 percent in 2013 due to its stable macroeconomic fundamentals amid global uncertainties.
In its latest report, IIF said that the country’s macroeconomic stability has bolstered its gross domestic product (GDP) against recurrent turmoil in the global financial markets and should pave the way for a strong revival in growth over the near term.
“The drag on growth from exports should soon run its course, while accommodative monetary measures should help stimulate domestic demand,” IIF said after the country’s exports grew by 3 percent in January after eight consecutive months of contraction.
IIF also said that the Aquino government's success in containing its budget deficit gives the Bangko Sentral ng Pilipinas’ (BSP) monetary authorities “considerable latitude.”
IIF said the BSP’s overhaul of the liquidity management regime was long overdue and is a positive step forward that may not be fully appreciated by the markets, adding the further reductions in the reserve requirement during the year are likely to be forthcoming.
“The change should have broader positive ramifications for the economy and for the conduct of monetary policy after the initial adjustment. A lower reserve requirement and strong loan growth also suggest the authorities will be cautious in cutting policy rates, although another 25 basis-point reduction may come by midyear,” IIF said.
Meanwhile, the Department of Finance earlier reported that the national government’s budget deficit was 2 percent of GDP last year, down from 3.5 percent in the previous year, while its total debt was around 50.9 percent from a peak of 74 percent in 2004.
“The government still needs to provide much more extensive public services than it does at present, so the key to fiscal sustainability will continue to rest on an overhaul of the archaic and inefficient tax region rather than on spending restraint,” IIF said.
“Nevertheless, the benefits from maintaining macroeconomic stability should soon pay off in terms of stronger growth for the economy,” it added.
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