IMF cuts Philippines' 2017 growth forecast to 6.6 pct

Enrico Dela Cruz, Reuters

Posted at Aug 08 2017 04:05 PM | Updated as of Aug 08 2017 06:07 PM

MANILA - The International Monetary Fund trimmed its 2017 growth forecast for the Philippines to 6.6 percent from 6.8 percent, citing slower than expected first quarter expansion, but was optimistic the economy would grow strongly in the medium term.

There is no evidence that investor confidence in one of Asia's fastest-growing economies has been hit by security worries, an IMF official said on Tuesday.

However, he warned that rapid credit growth and strong private investment could lead to overheating.

"The Philippines really stands out as a place that continues to do very well economically," Luis Breuer, who led an IMF mission that just completed a review of the economy, told reporters. 

"Growth is very strong. At the same time, inflation is very low," he said.

While the new 2017 forecast was lower than the 6.8 percent the IMF estimated in February, Breuer said he expects growth to be at 6.8 percent in the medium term, supported by robust domestic demand and a recovery in exports. 

"We have no evidence that confidence has been weakened because of any regional security events," he said, citing buoyant investment numbers.

The IMF team, during its review, spoke to banks and conglomerates and asked them their outlook for investments and the economy in the near term, said Breuer. 

That was amid concerns that more than two months of fighting between the Philippine military and Islamist militants in the southern city of Marawi could dent economic growth.

IMF pointed mainly to external risks including slower growth in China, U.S. monetary tightening and worries over the global economy.

For the Philippines, Breuer said "the combination of rapid credit growth, buoyant private investment and fiscal expansion could lead to overheating."

Lending by Philippine banks has been increasing rapidly. In May, loans were 18.7 percent larger than a year earlier, and in April the growth pace was 19.2 percent.