Press Release No. 15/150

Press Release: Statement at the End of an IMF Staff Mission to the Philippines

March 31, 2015

An International Monetary Fund (IMF) mission led by Chikahisa Sumi visited Manila from March 25−31. The mission met with the Governor of the Bangko Sentral ng Pilipinas (BSP), the Secretaries of the economic cluster, senior government officials, private sector representatives, and the financial community. At the conclusion of the visit, Mr. Sumi issued the following statement:

“Real GDP continued to grow briskly and unemployment fell in 2014. The 6.1 percent growth in 2014 was one of the fastest in the region, led by a strong contribution of household consumption, fixed capital formation and net exports. While agricultural production and government spending were weaker than expected, both sectors rebounded in the last quarter of 2014. The unemployment rate fell to 6.8 percent in 2014 with about 1 million new jobs created, while poverty remained a challenge.

“Economic growth is expected to rise to 6.7 percent in 2015 due to lower commodity prices, higher public spending, and continued strong private construction and export growth. Inflation is projected to remain in the lower end of the BSP’s target range, reflecting lower commodity prices. The current account surplus is expected to strengthen due mainly to lower oil prices and strong inflows from business process outsourcing, tourism and remittances.

“Risks to this baseline outlook stem from both external and domestic sources. Disruptive asset price shifts in financial markets due to asynchronous monetary policies in advanced economies remain a risk, although the Philippines’ strong fundamentals provide a cushion. External demand could be weaker if risks of deflation and lower potential growth in advanced economies and key emerging markets were to materialize. On the domestic front, the preemptive policy moves of the BSP in 2014 have resulted in more moderate liquidity and credit growth, reducing financial stability risks. The BSP’s generally proactive approach to oversight of the financial sector, particularly real estate exposures, provides additional support in this regard.

“On the macroeconomic policy mix, fiscal policy was contractionary with the budget deficit at 0.6 percent of GDP in 2014 while monetary conditions remained supportive of growth. Going forward, the fiscal stance should provide a stimulus as budget execution picks up in 2015/16 toward the 2 percent of GDP deficit target, while monetary and macroprudential policies continue to anchor inflation and financial stability. Over the medium term, structural policy issues center around increasing investment, particularly in infrastructure and human capital. In this regard, continued efforts at enhancing revenue mobilization will be critical to address the large spending needs, including enacting measures to offset any revenue eroding policy change and preferably through a comprehensive tax reform.

“The 2015 Article IV consultation mission is planned to visit Manila in May 2015.”