TOKYO, Japan – The Philippines, a laggard economy compared with its Southeast Asian neighbors, can grow faster in the medium term at more than five percent annually, International Monetary Fund (IMF) officials said.
In a briefing here, they said higher state revenues and increasing the spending on infrastructure will pave the way for more domestic growth.
“Certainly we see the potential for the Philippines to raise its growth rate well above five percent over the medium term,” said Anoop Singh, director of the Asia and Pacific Department of the IMF.
“I think they are trying to build infrastructure financing and the focus is on domestic demand, but in a way that is focused on infrastructure, to raise potential growth,” Singh added.
In the World Economic Outlook (WEO) released during the IMF-World Bank Annual Meetings here, the Philippine economy is seen to post a 4.8-percent uptick for 2012 and 2013.
The IMF maintained the 2012 forecast but it cut the 2013 growth outlook from 4.9 percent.
In the first half of 2012, the Philippines’ gross domestic product climbed 6.1 percent due to firm domestic demand and increased public spending. It is above the government’s target of five to six-percent growth this year.
For his part, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said they will maintain monetary price stability, which will be beneficial for more growth.
“We see that the inflation rate this year and next year will be well below, in fact closer to the lower end of the target range [of three to five percent],” Tetangco said.
The BSP sees continuous robust consumption and acceleration in government spending, providing a push to economic growth, he said.
The Philippines has suffered from investment constraints due to fiscal difficulties, said Masahiko Takeda, deputy director for Asia and Pacific Department of the IMF.
However, the time is ripe for the country to increase infrastructure spending “to lay the foundation for long-lasting domestic investment-led growth.”
In 2010, the government launched the Public-Private partnership (PPP), its flagship economic program focusing on infrastructure works like the construction and expansion of toll roads, port terminals, schools buildings and airports.
Two projects have been awarded so far: the $46.6-million Daang Hari-South Luzon Expressway Link Road Project and the P16-billion PPP for School Infrastructure Project.
Singh said the Philippines is seeking revenue increases to ensure that spending on infrastructure can rise in a sustainable way.
So far, the Philippines is a laggard in the Association of Southeast Asian Nations-5 (ASEAN-5) bloc that includes Indonesia, Malaysia, Thailand and Vietnam.
IMF said Indonesia will grow the fastest this year and the next at six percent and 6.3 percent, respectively. Malaysia’s economy is seen to grow the slowest, at 4.4 percent for 2012 and 4.7 percent for 2013.
“Growth in Asia has slowed but Asia remains a growth leader,” Singh said.
Singh added that Asia has room for a strong policy response if risks of downside risks like worsening exports materialize.
ASEAN-5 will expand by 5.4 percent this year and 5.8 percent next year, IMF said. This compares with the 5.4 percent (2012) and 6.2 percent (2013) in WEO last April.