The Philippines is relatively insulated from the global economic crisis but growth in the Southeast Asian nation should still slow sharply to 2.25 percent this year, the International Monetary Fund said on Wednesday.
The forecast, announced by IMF Country Director Dennis Botman in Manila, was lower than a projected 2.9 percent growth for 2009 given by the Fund in Washington on Tuesday.
"That information was based on board discussions on Jan. 16," Botman said. "Since then, we have revised the growth forecast."
It also saw inflation averaging at 4.8 percent over 2009, compared to a government target of 2.5-4.5 percent.
The country was expected to post a balance of payments (BOP) deficit of $500 million this year, the Fund said, a reversal of last year's $89 million surplus, a four-year low. The government has forecast a BOP surplus of more than $500 million this year.
"The downward revision to growth in the Philippines is smaller compared to other emerging market countries, owing to relatively robust domestic demand and a more muted impact of the crisis on net exports," the IMF said in a statement, adding that the economy should expand 4.0 percent in 2010.
It said the Philippines' banking sector was relatively strong because "non-performing loans have declined, direct exposure to toxic assets was limited and the capital adequacy ratio of the banking system as a whole is high by international standards."
The IMF also said the Philippines should consider:
- doubling the deposit insurance limit to 500,000 pesos ($10,475) as a precautionary measure
- capping the fiscal deficit at 2 percent of GDP to entrench investor confidence while supporting growth
- approving legislation to reform sin taxes, rationalise fiscal incentives and streamline optional deductions for the self-employed and professionals
- streamlining the operations of the National Food Authority aimed at fully recovering the cost of its operations and limiting its role to providing food security.