WASHINGTON, D.C. – “The Philippine economy has performed well during the past several years and the strong macro fundamentals provide a solid foundation to meet the remaining challenges. [And] the new administration has an opportunity to put the economy on a higher and more equitable growth path while reaping the dividends from its young and growing population.”
This was one of the key observations in the Staff Report issued after the conclusion of the 2016 Article IV Consultation between the Philippines and the International Monetary Fund (IMF) here.
Minister Patrick A. Chuasoto, Chargé d’Affaires ad interim of the Philippine Embassy in Washington, D.C., welcomed the report of the IMF staff and the assessment of the Executive Board.
“The Philippines appreciates the serious and thoughtful work that has gone into the preparation of the report, as well as the observations of the Executive Board. We look forward to continuing to work with the IMF towards maintaining the current growth momentum, improving competitiveness, institutionalizing good governance, and moving closer to our shared objective of inclusive growth,” Minister Chuasoto said.
“The outlook for the Philippine economy remains favorable despite external headwinds,” the IMF stated in a press release, which also saw the Fund revising its real GDP growth forecast for the Philippines upwards to 6.4% in 2016 and 6.7% in 2017.
The IMF’s Executive Directors, agreeing with the appraisal of the IMF staff report, supported “the Philippine authorities’ goal to accelerate poverty reduction and their priorities for structural reforms.” They also positively noted “the focus on financial deepening and inclusion as essential elements of the authorities’ inclusive growth strategy.”
The following are the notable findings in the Staff Report:
- Economic growth is supported by robust domestic demand and is broadly in line with potential while the outlook for inflation is well within the target band set by authorities. The external position is sound and fiscal policy is prudent, with a low and declining debt-to-GDP ratio.
- Poverty and inequality continue to be challenges for the authorities. The IMF emphasized the need to address infrastructure development in order to promote private investment and job creation. It also called for the improvement of implementation capacity with respect to public investment in infrastructure.
- Investment in infrastructure and human capital, financed through increased government revenues while allowing a small increase in the deficit, is needed alongside structural reforms to reap the Philippines’ demographic dividend, promote inclusive growth and reduce poverty.
- Some of the main policy recommendations included focusing fiscal policy on infrastructure and human capital; maintaining the current monetary policy stance; continuing close watch over the financial system and any emerging systemic risks; and adopting structural reforms on foreign direct investment and competition.
In a statement during the consultation, Mr Marzunisham Omar, Executive Director for the Philippines, and Mr Thomas Benjamin Marcelo, Senior Advisor to the Executive Director, cited the conscious effort of Philippine authorities to make development planning inclusive and sustainable.
“The authorities, after broad consultations, have developed AmBisyon Natin 2040, the long term vision of the Philippines and will make this an anchor for development planning across administrations, thereby ensuring sustainability of development initiatives,” they said.
“Risks to the outlook are tilted to the downside. The Philippine authorities are well equipped to respond as needed with suitable policies should any risks materialize, particularly given the strong fundamentals and ample policy space,” the IMF concluded.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds annual bilateral discussions with member governments to assess each country’s economic health and determine any potential financial concerns.