The IMF also took a more conservative stance than the Philippine government in the aftermath of the economic fallout that was anticipated because of the US-Afghan conflict, downscaling its growth projections for the country in 2002 to 3.2 percent from 3.5 percent.
In a recent briefing, IMF managing director for the Philippines Sean Nolan said the IMF’s growth forecast for this year had to be revised anew because the local economy fared better than expected.
Despite the global downturn, the local economy remained resilient in the first three quarters. All major sectors posted positive growth rates led by services at 4.2 percent. Agriculture bucked bad weather, industry grew 1.6 percent despite the continued weakening of the world economy.
The growth in real GDP (gross domestic product) and GNP (gross national product (GNP) of 3.1 percent and 3.7 percent respectively, suggests the Philippines will not recede unlike other Asian economies.
Other favorable elements are: declining interest and inflation rates, decrease in the world price of crude oil, the apparent bottoming out in the export sector, and concerned moves the developed countries to cut interest and avert a global recession.
The IMF however, took a more cautious stance in forecasting the Philippines’ GDP growth for 2002.
In its latest World Economic Outlook, the IMF said emerging markets such as the Philippines are still being hit on several fronts by the events of Sept. 11 and their aftermath, resulting in a weaker outlook.
This weaker outlook stems from several interrelated influences.
These include the further economic slowdown expected in the advanced economies and spillover effects on trade and confidence, particularly the strong impact of the slowdown on some sectors – notable information technology and tourism to which some emerging markets are heavily exposed.
Also, financial market linkages with advanced economies, especially in view of increased market uncertainties and deterioration in external financing conditions since Sept. 11, and downward pressures on prices of fuel and non-fuel commodities, many of which were already weak.
The IMF said the relative significance of these channels varies from region to region, although they all tend to be relevant to some degree.
Asia for example, will probably be strongly affected through the trade channel, with both export prices and volumes shown to be sensitive to the advance economy cycle. Compounding this linkage is the heavy exposure of many Asian economies to the severe downturn in the global economic cycle and some will also be hit by the downturn in tourism.
The IMF’s bearish view however, is in contrast with the bullish outlook of President Arroyo’s economic team.
Economic Planning Secretary Dante Canlas said the economy next year should post GDP growth of up to 4.5 percent next year. He admitted though that this will hinge largely on the recovery of the US, the country’s biggest trading partner.
On the other hand, GDP must grow by 3.9 percent in the fourth quarter to bring the average improvement for the year to 3.3 percent which is the low-end of government’s economic growth target this year.