In its report following the annual post program monitoring (PPM) review, the IMF said such a failure would keep the country’s financing requirements and vulnerabilities at high levels over the medium term, leading growth to trend down by the end of 2010.
At this level, the IMF said such growth would only be about two percent in per capita terms.
"It would likely do little to improve the lives of the estimated 40 percent of the population with incomes below $2 a day," the IMF said.
According to the IMF, the country’s growth rates would peak at 5.2 percent this year but without the reforms, the rate would start declining in 2005 and continue until 2010.
In its September World Economic Outlook, the IMF said Asian economies in general were expected to be strong this year, although the Philippines would lag behind Thailand and Malaysia in Southeast Asia whose growth rates were expected to reach 6.2 percent and 6.5 percent, respectively.
IMF resident representative Vikram Haksar told a press conference earlier that the IMF’s revised 2004 projection reflected the strong first semester performance of the country’s gross domestic product (GDP).
Haksar said the projections included one-time factors such as the surge in agricultural production in the first half of the year owing mainly to good weather conditions and the delay of the harvest season in the last quarter of 2003.
Earlier in August, IMF mission head Masahiko Takeda made the preliminary projection that the 2004 GDP would grow by 4.9 percent, instead of the original 4.5 percent projected by the IMF at the beginning of the year.
The final forecast turned out to be more optimistic but the looming fiscal crisis would change the flavor of growth expectations over the medium term, making it critical for the government to implement aggressive reforms, the IMF said.
"Strong implementation of reforms will improve the prospects for growth and hence poverty reduction," the IMF said.
The IMF projected that by 2005, the growth momentum would slow down to 4.2 percent in the Philippines while Thailand and Malaysia were expected to grow by 6.4 percent and 6.3 percent, respectively.
The Philippines would outpace Indonesia this year as its economy would grow by only 4.8 percent but by 2005, Indonesia would outpace the Philippines with its GDP projected to expand by five percent compared to 4.2 percent for the Philippines.
"Part of the reason is due to the fact that Philippine growth accelerated faster in 2004 and there is a higher base effect," Haksar explained.
The other factor, Haksar said, is the country’s dependence on imported oil which made it more vulnerable to the wild fluctuations in world oil prices.
Without the revenue and fiscal reforms, these factors would be aggravated by the government’s fiscal woes, ultimately curtailing whatever growth momentum had been established this year.
Despite the good growth performance, however, the IMF observed that unemployment rate had risen to 13.7 percent in the second quarter of the year, up from 12.2 percent last year.