Philippines to post 6% growth rate — IMF

PHILIPPINE NEWS SERVICE — THE Philippines will likely post nearly 6-percent economic growth in 2007 and 2008, but it must not rely too much on privatization but collect taxes more efficiently to raise more money for development, the International Monetary Fund said yesterday.

“We expect the Philippines to grow at rates close to 6 percent in 2007 and 2008,” IMF managing director Rodrigo Rato said as he praised President Gloria Macapagal Arroyo’s administration for its economic reforms.

He also praised the government for raising the value added tax to 12 percent from 10, and in particular the tax on energy products.

“Because most energy is consumed by wealthier people, and because the government used part of the proceeds… to increase spending on infrastructure and social services, the effect on the poor was offset,” Rato said.

But his growth projections are below the government’s forecast of 6.1 to 6.7-percent growth for 2007 and 6.1 to 6.8-percent expansion for 2008 after the economy grew 5.4 percent in 2006.

Rato, who earlier met with Mrs. Arroyo and other officials as part of a Southeast Asian tour, said “monetary policy has been very successful,” citing efforts to strengthen Philippine banks’ balance sheets.

He also praised the government’s efforts to spend more funds to improve the country’s crumbling infrastructure.

But he and other IMF officials also warned that the Philippines had to act on improving its fiscal position following the announcement that the budget deficit was again rising beyond the P63-billion target set by the government.

Government economic planners have said that they can bridge the budget shortfall by privatizing state assets this year.

“I believe the government and the President are fully aware of the need to raise tax efficiency,” Rato said.

He said privatization “does not produce sustainable revenues,” and that its real value was in increasing market efficiency.

IMF Asia-Pacific director David Burton said the “authorities were taking steps to improve revenues.”

He said the fiscal situation had already improved from three or four years ago, adding the difference was like “night and day.”