IMF eyes rebound of PHL economy in H2 of 2014

By Joann Santiago

MANILA, July 25 (PNA) — A ranking official of the International Monetary Fund (IMF) said the Philippine economy is expected to rebound in the second half of 2014 after a slowdown in the first quarter.

”Over-all it’s still a fairly strong growth for the Philippines vs. ASEAN. It’s really reflecting the first quarter but it’s predicated on fiscal spending,” IMF Representative to the Philippines Shanaka Peiris told reporters Friday.

Last April and May, government spending decelerated but the IMF executive believes that this will post improvements in the coming months.

”We are assuming that they will catch up on spending…We are expecting that (spending slowdown) to reverse and hit closer to the two percent deficit spending by the year end,” Peiris said.

The government targets budget deficit in 2014 to account to about two percent of GDP at about P266 billion.

The Philippine economy grew by 5.7 percent, as measured by gross domestic product (GDP), in the first three months of the year.

This is slower than the previous quarter’s 6.3 percent and year-ago’s 7.7 percent due to the impact of the calamities particularly Typhoon Yolanda (Haiyan) that hit the country in the last quarter of 2013.

Peiris said this development made the multilateral lender to cut its growth forecast for the country this year to 6.2 percent from 6.5 percent last April. The 2015 forecast is maintained at 6.5 percent.

He pointed out, however, that the cut in the growth forecast for the country is in line with that of the region and the world.

IMF released Thursday its World Economic Outlook update and it now forecasts world output for 2014 to be at 3.4 percent, lower than the 3.7 percent projection last April. The 2015 forecast is still at four percent.

For the ASEAN-5, which groups Indonesia, Malaysia, Philippines, Thailand, and Vietnam, it is projected to expand by 4.6 percent this year, lower than the five percent projection earlier. Next year, the forecast was cut by 0.2 percnet to 5.6 percent.

”The Philippines is considered to be among the more resilient emerging economies,” Peiris said.

He, on the other hand, said risks remain and these include failure by the government to meet its spending program, commodity price shocks as well as the looming El Nino phenomenon.

Meanwhile, Peiris declined to say what the IMF or investors are thinking of the government vis-à-vis the issue of Disbursement Acceleration Program (DAP) implementation.

”It’s very hard to say what they thinking…There are lots of noise but if this leads to slowdown in spending that is risk to growth,” he said.

However, he cited that “just because you cannot re-allocate that does not mean lower spending.”

”That doesn’t mean they can’t hit the deficit target. You can’t really gauge it (impact of DAP issue on government spending) that’s why we put in in the baseline (as possible risk to domestic growth),” he added. (PNA)