IMF ups RP growth forecast to 1.5% in 2009

MANILA, Philippines - The International Monetary Fund (IMF) adjusted upwards the country’s economic growth forecast for this year and next year despite the damages caused by tropical storm Ondoy and typhoon Pepeng.

Il Houng Lee, head of the visiting IMF team, said in a press conference that the country’s gross domestic product (GDP) would likely expand by 1.5 percent this year instead of one percent and by 3.5 percent instead of 3.2 percent next year.

“Staff now projects growth will reach 1.5 percent in 2009 and accelerate further to 3.5 percent in 2010 led by private consumption,” Lee stressed.

He pointed out that the domestic economy would continue to be fueled by strong private consumption brought about by a steady growth in overseas Filipino workers’ remittances this year and next year.

He explained that IMF expects the amount of money sent home by Filipinos abroad growing by four percent this year and by six percent next year.

The Bangko Sentral ng Pilipinas (BSP) has revised upwards its OFW growth forecast this year to four percent or a record $17.1 billion this year from $16.4 billion last year.

Lee said the country’s GDP growth have rebounded sharply to 1.5 percent in the second quarter of the year after an initial dip to 0.6 percent in the first quarter of the year.

Despite the recovery, the country’s GDP expansion slackened to one percent in the first half of the year from four percent in the same period last year due to the full impact of the global economic crisis.

“The economic recovery in the Philippines is also gaining momentum,” the visiting IMF official said.

Last October, IMF adjusted upwards its projected GDP growth to one percent instead of a contraction of one percent and to 3.2 percent instead of the growth of 2.25 percent next year.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) sees the country’s GDP expanding between 0.8 percent and 1.8 percent this year from 3.8 percent.

Meanwhile, Lee said the visiting IMF team also expressed concern over the country’s deteriorating fiscal condition brought about by weak tax take and higher spending.

The government already booked a shortfall of P266 billion from January to October this year exceeding the full-year record budget deficit ceiling of P250 billion or 3.2 percent of GDP. The shortfall already eclipsed the previous record shortfall of P210.7 billion or 5.3 percent of GDP booked in 2002.

“It’s a done deal. The government could not do anything about it anymore,” he said.

The Philippines hopes to contain the deficit at P234 billion or 2.8 percent of GDP next year as it expects GDP to expand between 2.6 percent and 3.6 percent.

Lee said there is an urgent need for the government to keep the deficit below P290 billion or 3.5 percent of GDP next year.

“The mission recommends containing the deficit at about 3.5 percent of GDP by maintaining civil service wage costs and public investments at projected 2009 levels and by introducing new legislative and administrative measures,” he said.