The International Monetary Fund (IMF) downgraded its Philippine economic growth outlook for 2017, as a result of a weaker-than-expected performance in the first three months of the year.
The Philippine economy is now expected to grow by 6.6 percent this year, compared with an earlier projection of 6.8 percent by the fund in April, IMF Asia and Pacific Division chief Luis E. Breuer said.
“The reason for that was basically math. Growth in the first quarter was lower than anticipated. And, as you know, growth is measured relative to the same period last year, when – during electoral cycle – there was higher spending which led to temporarily higher growth” he said in a briefing in Manila City.
“When you combine these factors, growth in the first quarter was a bit slower than expected,” Breuer noted.
The IMF staff has just completed the Article IV mission to the Philippines.
The gross domestic product – a measure of the goods and services produced by the country in a given period – grew by 6.4 percent in the first quarter of the year, slower than the 7 percent forecast issued by Socioeconomic Planning Secretary Ernesto M. Pernia.
“Growth in the first quarter was a bit slower than expected. So, on a numerical average, this reduces the growth,” Breuer said.
No security concerns
In the same briefing, Breuer said investor confidence remains strong despite the ongoing armed conflict in Mindanao.
“We have no evidence that confidence has been weakened because of any regional security events,” he said.
“This is what we heard and when we look at the numbers, including private and foreign direct investments, the numbers are quite buoyant. Investment is very dynamic” he added.
In terms of the monetary policy, Breuer said there is no immediate need for the Bangko Sentral ng Pilipinas (BSP) to tweak interest rates.
“Interest rates, we think monetary stance is appropriate today,” he said.
He noted, however, that the expected tightening of global monetary policy could push the Philippines to follow suit.
“When we look at the world, we do see interest rates are going to increase, and this is most likely going to have an impact on the Philippines,” he said.
“We would expect higher interest rates in the Philippines down the road in line with the global tightening of financial conditions, but we don’t see the need to tighten monetary policy stance today,” he added.
The policy-setting Monetary Board is scheduled to meet on Thursday, August 10, to discuss the central bank policy stance and if there is a need to tweak interest rates. — VDS, GMA News