After a soft patch in the first half of the year, economic growth is now recovering. Inflation has declined, reflecting lower oil prices, rice tariffication, and a decisive monetary policy response to the inflation spike in 2018.

Latest Article IV consultation outcomes show the International Monetary Fund doubt the likelihood of another banner year for the Philippines in terms of local output growth. The annual visit projects sub-potential growth for 2019. AFP

Although the economy grew at a faster rate averaging 6.2 percent in the third quarter, the International Monetary Fund (IMF) is unimpressed and maintained that local output growth measured as the gross domestic product (GDP) was likely to fall short of the 6 percent to 7 percent target.

The IMF’s Thomas Helbling, mission chief for the Article IV visit to the Philippines, said while the 6.2 percent GDP expansion was considered, the IMF still kept the country’s projected growth this year at 5.7 percent.

“Growth is projected at 5.7 percent in 2019, unchanged from the October 2019 World Economic Outlook, and to strengthen to 6.3 percent in 2020, underpinned by an increase in government spending and the recent monetary policy easing. The medium-term economic outlook remains favorable, especially if the strong structural reform momentum continues,” Helbling said.

He acknowledged the Philippines “remains one of the best-performing economies in the region,” though.

“After a soft patch in the first half of the year, economic growth is now recovering. Inflation has declined, reflecting lower oil prices, rice tariffication, and a decisive monetary policy response to the inflation spike in 2018,” he said.

Also, the IMF official said the now moderating inflation seen hitting 1.6 percent by year-end should ramp up and average higher to 3 percent by 2020 but still within the government’s 2 to 4 percent target band.

“Risks to the outlook are tilted to the downside. The near-term rebound in GDP growth could be weaker than expected because of global trade tensions and related policy uncertainty, a change in global financial conditions, and natural disasters,” Helbling said.

“On the upside, structural reform progress and infrastructure improvements could boost confidence and growth,” Helbling continued.

“Against this backdrop, this year’s Article IV consultation discussions with the authorities focused on policies to keep economic growth in line with its potential, achieve the inflation target, and address financial stability risks, and on structural reforms to lift the economy’s growth potential and further reduce poverty,” he added.

Meanwhile, Yongzheng Yang, IMF resident representative for the Philippines, said the higher projected GDP expansion next year was owed to the on-time approval of the 2020 budget that meshed well with the GDP recovery reported in the third quarter.

“This is our assessment taking into account the 6.2 (percent growth) in the third quarter was strong. That’s why we have the increase in growth rate for next year,” Yang said.

Much earlier, Socioeconomic Planning Secretary Ernesto Pernia said achieving the 6 percent GDP expansion for the year remains possible provided the economy expands by 6.7 percent in the fourth.

“(It is) very achievable. We have seen the economy surging and it will continue. Surging by 5 percentage points should be easy,” Pernia said.