IMF: PHL to survive global depression on strong payments position
11/07/2011
GMA News
GMA News
Because of its strong external payments position, the Philippines is capable of surviving another round of global recession, multilateral lender International Monetary Fund (IMF) said Monday.
"There is no way you can avoid the impact of the slowdown of the European and US economies. Fortunately, the Philippine government has large room to cope with the situation, both in fiscal and monetary policy areas," said IMF deputy managing director Naoyuki Shinohara in an interview with reporters.
Shinohara said the Philippines has a particularly strong position in terms of country's gross international reserves (GIR) and balance of payments (BOP).
"The external position is much stronger than before with large foreign reserves and stronger BOP. So the government here needs to be careful about possible impact of the global slowdown but at the same time I think they have enough room to respond to these situations," he the IMF official noted.
Bangko Sentral ng Pilipinas (BSP) data showed the Philippine GIR expanded by 32.6 percent to $75.814 billion in the 10 months to October from $57.153 billion a year earlier, boosted by the revaluation of the central bank gold holdings, its earnings from investments abroad, and foreign exchange operations.
Also, the BOP widened by 166 percent to $9 billion in the eight months to August from $3.381 billion a year earlier and topping the Bangko Sentral revised target of $6.7 billion for the year.
Impact on trade balance
However, the Philippine trade balance won’t be spared by the US and European crisis considering these economies are major buyers of Philippine products as well as the Southeast Asian nation’s main source of imported goods.
"In that extent, the Philippine economy will be hit by the slowdown of growth in those regions as well. As for the financial channels, we have seen in the recent months the decline in equity prices and exchange rate appreciation," Shinohara noted.
"The growth has slowed down a little bit this year mainly because of the global economic slowdown and the subsequent slowdown in exports as well as the cautious fiscal expenditure. But overall, the Philippine economy is doing well," Shinohara stressed.
Slower global demand and the Aquino administration’s underspending already weighed down Philippine output in the first half to 4 percent from a revised 8.7 percent a year earlier.
The multilateral lender downgraded its growth forecast for Asia to 6.3 percent from 6.8 percent this year and to 6.7 percent from 6.9 percent next year on expectations of slower global growth.
For the Philippines, the IMF made a GDP forecast of 4.7 percent from 5 percent this year and 4.9 percent from 5 percent next year.
The IMF believes there is no “quick fix" when it comes to the economic conditions in the US and in Europe, that it supports Philippine efforts to shave the its fiscal deficit to 2 percent of GDP from 2013 to 2016 when the term of President Benigno Aquino III ends, Shinohara said.
"On the fiscal side, it is important that they maintain prudence in policy management. We support the policy goals of the Philippine government in that issue. Of course they need to work on improving infrastructure, safety nets like education, they should come from stronger tax administration and through revenue raising measures," the IMF official said.
Another IMF official earlier said the Philippine government must raise fiscal spending, get more investors under the public-private partnership program, and widen its tax base.
The Philippines must overhaul its excise tax system and rationalize fiscal incentives to revenues that will finance its infrastructure development, IMF assistant director Vivec Arora. — VS, GMA News
"There is no way you can avoid the impact of the slowdown of the European and US economies. Fortunately, the Philippine government has large room to cope with the situation, both in fiscal and monetary policy areas," said IMF deputy managing director Naoyuki Shinohara in an interview with reporters.
Shinohara said the Philippines has a particularly strong position in terms of country's gross international reserves (GIR) and balance of payments (BOP).
"The external position is much stronger than before with large foreign reserves and stronger BOP. So the government here needs to be careful about possible impact of the global slowdown but at the same time I think they have enough room to respond to these situations," he the IMF official noted.
Bangko Sentral ng Pilipinas (BSP) data showed the Philippine GIR expanded by 32.6 percent to $75.814 billion in the 10 months to October from $57.153 billion a year earlier, boosted by the revaluation of the central bank gold holdings, its earnings from investments abroad, and foreign exchange operations.
Also, the BOP widened by 166 percent to $9 billion in the eight months to August from $3.381 billion a year earlier and topping the Bangko Sentral revised target of $6.7 billion for the year.
Impact on trade balance
However, the Philippine trade balance won’t be spared by the US and European crisis considering these economies are major buyers of Philippine products as well as the Southeast Asian nation’s main source of imported goods.
"In that extent, the Philippine economy will be hit by the slowdown of growth in those regions as well. As for the financial channels, we have seen in the recent months the decline in equity prices and exchange rate appreciation," Shinohara noted.
"The growth has slowed down a little bit this year mainly because of the global economic slowdown and the subsequent slowdown in exports as well as the cautious fiscal expenditure. But overall, the Philippine economy is doing well," Shinohara stressed.
Slower global demand and the Aquino administration’s underspending already weighed down Philippine output in the first half to 4 percent from a revised 8.7 percent a year earlier.
The multilateral lender downgraded its growth forecast for Asia to 6.3 percent from 6.8 percent this year and to 6.7 percent from 6.9 percent next year on expectations of slower global growth.
For the Philippines, the IMF made a GDP forecast of 4.7 percent from 5 percent this year and 4.9 percent from 5 percent next year.
The IMF believes there is no “quick fix" when it comes to the economic conditions in the US and in Europe, that it supports Philippine efforts to shave the its fiscal deficit to 2 percent of GDP from 2013 to 2016 when the term of President Benigno Aquino III ends, Shinohara said.
"On the fiscal side, it is important that they maintain prudence in policy management. We support the policy goals of the Philippine government in that issue. Of course they need to work on improving infrastructure, safety nets like education, they should come from stronger tax administration and through revenue raising measures," the IMF official said.
Another IMF official earlier said the Philippine government must raise fiscal spending, get more investors under the public-private partnership program, and widen its tax base.
The Philippines must overhaul its excise tax system and rationalize fiscal incentives to revenues that will finance its infrastructure development, IMF assistant director Vivec Arora. — VS, GMA News
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