(CNN Philippines) — Despite uneven and generally weaker global growth prospects, the International Monetary Fund (IMF) maintains a favorable outlook on the Philippine economy.
A few days before the government released GDP growth figures for the first quarter of 2015, Chikahisa Sumi of the IMF projected that the Philippines will post a full-year GDP growth of 6.7%. Sumi is an assistant director for the organization’s Asia and Pacific Department.
He believes that increased household consumption brought by low commodity prices, and higher public spending will buoy the economy’s growth.
Likewise, lower import prices are also expected to keep inflation below the lower half of the target band, while net exports are projected to soften due to sluggish growth abroad and exchange rate appreciation.
Sumi also believes that the country’s current account surplus to exceed 5% of GDP because of lower oil prices and continued inflows from remittances and the business process outsourcing sector.
However, the IMF official pointed out that upside and downside risks — from both in and out of the country — remain. Demand may be supported by lower commodity prices. “On the downside, disruptive asset price shifts due to asynchronous monetary policies in advanced economies are a risk, but the Philippines’ strong fundamentals should provide the necessary cushion.”
At the local level, Sumi believes the lower public spending poses a threat to the economy, as well as the threat of the El Niño weather phenomena.
“Continued weak budget execution could also slow down improvements in infrastructure. Finally, there is a downside risk associated with El Niño conditions leading to a poor harvest and a rapid run-up in food prices.”
Moving forward, Sumi said that the government’s fiscal policy should revolve around infrastructure investment and inclusive growth. “Improvements in the quality of public spending should be institutionalized through the enactment of the proposed financial bill that would also strengthen the efficiency of disbursements.”
Figures from the Philippine Statistics Authority released on Thursday (May 28) revealed that the GDP grew by just 5.2% in the first three months of this year, landing below the government’s expectations. It is the lowest quarterly growth since the 3.7% expansion registered in the last three months of 2011.
“Despite strong growth and improvements in various areas over the last few years, the country has the potential to do even better and build a more inclusive society with reduced poverty, particularly in the context of the ASEAN [Association of Southeast Asian Nations] integration,” he said.
“This path to greater broad-based prosperity depends crucially on stepping up investment, including infrastructures and its young people, thereby creating much-needed employment opportunities for the fast-growing population.”
