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IMF casts below target GDP growth



The International Monetary Fund (IMF) expects the Philippines to grow at a much slower pace versus its previous outlook, even seeing a gross domestic product (GDP) print below the state’s 2 to 4 percent target.

In its latest World Economic Outlook, the IMF casted a 3.2 percent GDP view for the country for 2021, significantly lower than its 5.4 percent projection early this year.

Thomas Helbling, IMF mission chief for Manila said such reduction came largely from the lower-than-expected GDP level in the second quarter.

“Real GDP growth in the second quarter of 2021 was weaker than expected by IMF staff. Instead of increasing by 0.5 percent (quarter-on-quarter, on a seasonally-adjusted basis), it declined by 1.3 percent,” Helbling explained.

“This outcome seems to reflect a stronger negative impact of the second COVID-19 wave,” he added.

Still, the IMF executive said the slower economic recovery in the second semester due to the third wave of COVID-19, contributed to the latest revision.

According to him, continuity of current policy support, faster vaccine rollout and global growth will help spur economic rebound in 2022.

“Progress in the vaccination program and continued monetary and fiscal policy support will be central to the economic recovery in the near-term,” Helbling said.

“A stronger global economy will be another crucial element to the economic recovery,” he added.

Weak spending

Nicholas Mapa, senior economist at the ING Bank shared the same sentiment as he recognized the still tepid consumer demand to weigh in the country’s economic recovery.

“The dip in road vehicle sales for the third quarter will also be a drag on the third quarter GDP report with the first half GDP numbers getting a lift from outsized gains in sales of motor vehicles,” Mapa said.

“This together with still muted consumer spending and only a modest pickup in investment and government spending will likely result in GDP slipping below the government’s lower end growth target of 4 percent,” he added.