The Philippine economy is likely to grow by only 2.25 percent this year due to the easing demand in its major export markets, the International Monetary Fund (IMF) said.
The IMF said it saw growth slowing down even further than its initial 3.5-percent estimate in November 2008, which was already a revision of an earlier forecast that placed this year's growth rate at 3.8 percent.
"Because it is very much caught up in the kind of global factors that are affecting demand across the region, we are projecting Philippine growth in 2009, on average, to be about 2.25 percent," said Anoop Singh, Director of the IMF's Asia and Pacific Department.
Despite the slowdown, however, the IMF said the country still had "considerable room" for monetary easing which would stimulate growth, especially if done in tandem with a calibrated increase in fiscal spending.
Singh said the IMF was encouraged by the decision of the Arroyo administration to undertake a fiscal stimulus plan in order to prevent the economy from stalling.
"There is some room on the fiscal side, not an awful lot, but there has been approval by Congress of the budget that has some appropriate stimulus," he said.
IMF Managing Director Dominique Strauss-Kahn, for his part, said the world economy will recover from the financial crisis "at the same time."
"We see it at the same time as the rest of the world because we don't believe that it's really possible for the Asian economies to have a recovery with the rest of the world economy being in such a bad shape," Strauss-Kahn said.
In the process, however, Strauss-Kahn said some Asian economies, which are more dynamic and have significant resources and strong fundamentals, may recover slightly faster than others.
"I think some Asian economies are very good candidates to be the leading economies when that process will start again," he said.
Meanwhile, Strauss-Kahn called for the shift from export to domestic demand, since the former would be the one hit hardest by the global financial crisis. He said, however, that the transition cannot be done overnight.
"The problem in shifting from an export model to a domestic growth model is not that much to know how to increase the domestic demand but to know how to increase the supply, which is likely to alter this domestic demand," he said.