MANILA (Reuters):The International Monetary Fund said on Monday it had reduced its growth forecasts for the Philippine economy this year and the next as weak public investment and exports so far in 2011 highlight the risks from a global downturn.
Domestic monetary policy may need to be adjusted if the global economy slows further or more external shocks put pressure on Philippine policy, the IMF said in a statement at the end of regular consultations with local officials.
The IMF said it expects growth this year and in 2012 at 3.7 percent and 4.2 percent, respectively, below its previous forecasts of 4.7 percent and 4.9 percent in its World Economic Outlook report in September.
“The global environment remains a key risk to the outlook,” the Fund said in the statement. “The key challenge is to navigate through the global uncertainty to maintain macroeconomic stability while building the foundations for faster and more inclusive growth.”
It forecasts Philippine inflation to stay within the government's target range of 3 to 5 percent this year and the next. In September, the Fund had estimated annual inflation for the Southeast Asian country at 4.5 percent this year and 4.1 percent in 2012.
“Monetary conditions remain supportive of growth, suggesting that an easing of conditions is not needed at this time,” the statement said.
“If global downside risks or further negative shocks were to materialise, monetary policy could be recalibrated.” Central bank officials have said Philippine inflation remained manageable, supporting a possible easing in monetary policy if the growth outlook worsens next year.
The IMF also expects faster state spending to support growth next year, adding the medium-term goal of fiscal consolidation
“should strengthen the ability of the budget to respond to future shocks.”