ASEAN KEY DESTINATIONS
IMF raises 2011 Philippines outlook
Vivek Arora, IMF mission chief, said the lender now expects Philippine gross domestic product (GDP) to grow by 5 percent next year, faster than the forecast of 4.5 percent made in October.
"The fragile global economic environment remains a key to the outlook. In addition, rising capital inflows need to be carefully managed in order to avoid asset price inflation and macroeconomic volatility," Arora said in a briefing at the conclusion of the 2010 Article 4 consultations with Manila.
Philippine GDP grew by 7.5 percent in the first nine months of this year, or well above the five to six percent official growth goal.
The IMF also said it may be necessary for the Bangko Sentral ng Pilipinas to start normalizing its policy stance in the near term to forestall excess liquidity and inflation pressures amid a narrowing output gap.
"Monetary policy has played a helpful role in keeping inflation low while fostering the recovery. If the global environment was to worsen, or other downside risks materialize, the pace of policy normalization could be adjusted," Arora said.
The IMF also expects inflation to remain within the target range at 4 percent this year and in 2011, while the balance of payments (BOP) would likely remain in surplus.
The BOP summarizes the country's economic transactions with the rest of the world. On the fiscal side, the government's efforts toward consolidation should help to provide the budget with more space to respond effectively to future shocks, Arora said.
"The authorities' emphasis on strengthening tax administration is welcome and the Fund is committed to supporting these efforts with technical assistance," the IMF official said, adding that it would be important to rationalize fiscal incentives, address tax distortions and reform the excise tax system.
The increase in the IMF's growth projection for the Philippines was consistent with its higher growth estimates for the region. In its World Economic Outlook released last October, the IMF said Asia would post an average growth of 8 percent this year and 7 percent in 2011. These figures were about a percentage point higher than the Fund's earlier forecasts.
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