IMF raises RP economic forecast to 6 percent

The International Monetary Fund Thursday upgraded anew the Philippines' 2010 economic outlook after the country posted a stronger-than-expected gross domestic product GDP in the first quarter of the year. In its World Economic Outlook, the IMF raised the Philippine GDP growth forecast to 6.0 percent from 3.6 percent based on the previous WEO released last April. The Philippine GDP grew 7.3 percent in the first quarter. The latest GDP forecast reflects the higher end of the revised GDP growth target of 5 percent to 6 percent recently adopted by the Cabinet-level Development Budget Coordination Committee (DBCC). Despite the upgrade, the Philippines will lag behind its Southeast Asian neighbors, with the Association of Southeast Asian Nations or ASEAN-5 that includes Indonesia, Thailand, Philippines, Malaysia, and Vietnam now expected to grow by 6.4 percent instead of 5.5 percent this year. The IMF's revised GDP forecast for the Philippines is slower than Thailand's 7percent that was revised from 5.5 percent; Malaysia's 6.7 percent from 4.7 percent; Vietnam's 6.5 percent from 6.0 percent. IMF said that the economies of China, Japan, India, Australia, and New Zealand would grow by 7.5 percent instead of 7 percent, helped by exports and strong domestic demand. "Asia’s strong recovery from the global financial crisis continued in the first half of 2010, despite renewed tension in global financial markets. First-quarter GDP outturns were generally stronger than anticipated at the time of the April 2010 WEO, and high-frequency indicators suggest that economic activity remained brisk during the second quarter," the multilateral lender said. Newly industrialized Asian economies (NIEs) including Hong Kong, Singapore, Korea, and Taiwan will post a GDP growth of 6.7 percent, the lender said. "Both NIEs and ASEAN economies are expected to grow by about 6.5 percent in 2010, as a result of surging exports and private domestic demand, before moderating to 4.75 percent and 5.5 percent, respectively, in 2011." The debt crisis in Europe will have a negative impact on world economies, forcing a slowdown next year. "Although baseline growth forecasts for 2010 have been revised upward, downside risks have intensified for the second half of the year and for 2011 following the financial turbulence in the euro area," the IMF said. "Asia has only limited direct financial linkages to the most vulnerable euro area economies, but a stall in the European recovery that spilled over to global growth would affect Asia through both trade and financial channels. Many Asian economies, especially NIEs and the ASEAN economies are highly dependent on external demand, and their export exposure to Europe is at least as large as their export exposure to the United States." The 2011 Philippine GDP would grow by 4 percent, and comparatively slower than Vietnam's 6.8 percent, Indonesia's 6.2 percent, Malaysia's 5.3 percent, and Thailand's 4.5 percent. The growth of the ASEAN-5 would ease to 5.5 percent next year, the IMF said. The 2010 GDP outlook for US, Europe, United Kingdom, Japan, and Canada was raised to 2.6 percent from 2.1, before slowing down to 2.4 percent next year. In the first quarter of 2010, the IMF said that the world economy expanded at an annualized rate of over 5 percent. "Overall, macroeconomic developments during much of the spring confirmed expectations of a modest but steady recovery in most advanced economies and strong growth in many emerging and developing economies. Nevertheless, recent turbulence in financial markets — reflecting a drop in confidence about fiscal sustainability, policy responses, and future growth prospects — has cast a cloud over the outlook," it added. —VS, GMANews.TV