By Joann Santiago
MANILA, March 26 (PNA) — The International Monetary Fund (IMF) on Wednesday announced the upward revision of its growth projection for the Philippines to 6.5 percent from 6.3 percent last January.
In a briefing after the Article IV consultation, IMF mission chief Rachel Van Elkan noted that their forecast is below the actual output in 2013 of 7.2 percent but it is still robust as it is expected to get further lift from strong domestic demand and the reconstruction effort in the Visayas.
For 2015, growth is projected to still average at 6.5 percent but to slow down to six percent in the succeeding years.
Van Elkan, on the other hand, cited that “the Philippines has yet to realize its full potential for rapid, sustained and inclusive growth.“
“This will require reducing bottlenecks to investments and formal sector employment that may be discouraging broader based business activities,” she said.
She, however, stressed that the domestic economy remains resilient against external shocks.
”Looking ahead the economy is well positioned to absorb gradual tightening of financial conditions and to implement timely measured action on the domestic policy front,” she said.
Relatively, IMF projects inflation to average at four percent this year from 4.4 percent earlier.
Last February, rate of price increases slowed to 4.1 percent from the 25-month high of 4.2 percent in the previous month.
Average inflation in the first two months this year stood at 4.2 percent, at the upper half of the government’s three to five percent target for the year.
Van Elkan attributed the downward revision of the inflation target to the temporary restraining order (TRO) issued by the Supreme Court (SC) against the collection of higher transmission charges of the Manila Electric Company (Meralco) for the December 2013 bill.
She explained that since price of electricity did not shoot up as earlier announced, its contribution to inflation is a major upside risk anymore as earlier expected.
She clarified though that “administrative price changes will remain a risk.”
Impact of exchange rate on electricity prices remains but “the magnitude remains uncertain.”
“It depends on cyclical position of the economy and the activities,” she said adding that a “very strong pass through might surprise on the upside.” (PNA)