PH growth to rise on domestic demand: IMF
03/06/2012
"The challenge now is to navigate through the period of global uncertainty to maintain macroeconomic stability," the IMF said in its yearly economic health-check for the Philippines.
WASHINGTON - The Philippine economy should grow modestly this year on domestic demand, despite the risks to the broader global economy from Europe's sovereign debt crisis, the International Monetary Fund said on Monday.
In its annual review of the Philippine economy, the IMF forecast growth would rise to 4.2% this year, up from 3.7% in 2011.
Growth over the next two years could recover to around 5%, while inflation is likely to remain within the 3% to 5% official target range, it said.
"The challenge now is to navigate through the period of global uncertainty to maintain macroeconomic stability," the IMF said in its yearly economic health-check for the Philippines.
Concerns about Europe's debt crisis have increased financial market turbulence. World equity markets slipped on Monday after economic data raised expectations of a recession in Europe and China cut its annual growth forecast.
Philippine policymakers, however, are hoping that higher public spending on infrastructure projects will fuel growth of at least 5% this year after 2011's slower-than-expected pace.
The IMF report, which was completed on Jan. 18, said monetary policy in the Philippines was supportive of growth. The IMF suggested that cutting rates was not needed at the time.
The Philippine central bank cut its main policy interest rate to a record low of 4% last Thursday in line with the dovish policy stance of most central banks in Asia, which have focused on boosting growth as inflation worries wane globally.
The IMF said the Philippine financial system had only limited exposure to Europe - about 1.5% of total assets - although it cautioned that financial contagion could be felt if European banks pull back credit to the corporate sector.
The IMF said the authorities had informed IMF staff that European banks in the Philippines "were liquid, had access to a large local deposit base, and had not displayed undue signs of stress".
IMF staff estimated that the value of the Philippines' exchange rate was "broadly in line with medium-term fundamentals."
Growth over the next two years could recover to around 5%, while inflation is likely to remain within the 3% to 5% official target range, it said.
"The challenge now is to navigate through the period of global uncertainty to maintain macroeconomic stability," the IMF said in its yearly economic health-check for the Philippines.
Concerns about Europe's debt crisis have increased financial market turbulence. World equity markets slipped on Monday after economic data raised expectations of a recession in Europe and China cut its annual growth forecast.
Philippine policymakers, however, are hoping that higher public spending on infrastructure projects will fuel growth of at least 5% this year after 2011's slower-than-expected pace.
The IMF report, which was completed on Jan. 18, said monetary policy in the Philippines was supportive of growth. The IMF suggested that cutting rates was not needed at the time.
The Philippine central bank cut its main policy interest rate to a record low of 4% last Thursday in line with the dovish policy stance of most central banks in Asia, which have focused on boosting growth as inflation worries wane globally.
The IMF said the Philippine financial system had only limited exposure to Europe - about 1.5% of total assets - although it cautioned that financial contagion could be felt if European banks pull back credit to the corporate sector.
The IMF said the authorities had informed IMF staff that European banks in the Philippines "were liquid, had access to a large local deposit base, and had not displayed undue signs of stress".
IMF staff estimated that the value of the Philippines' exchange rate was "broadly in line with medium-term fundamentals."
