IMF Staff Completes 2019 Article IV Visit to Philippines
IMF News, November 18, 2019
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- Published: November 18, 2019
Mission overview
- IMF staff team led by Thomas Helbling visited Manila, Clark City, and New Clark City from November 5−18, 2019 for the 2019 Article IV consultation.
- Press Release No. 19/422; publication date: November 18, 2019.
- Press officer: Keiko Utsunomiya. Phone: +1 202 623-7100. Email: MEDIA@IMF.org.
Near-term macroeconomic assessment
- After a soft patch in the first half of 2019, GDP growth is expected to strengthen in the remainder of 2019 and in 2020, underpinned by government spending catching up with targets and recent monetary policy easing.
- Growth projections:
- Growth is projected at 5.7 percent in 2019 (unchanged from the October 2019 World Economic Outlook).
- Growth is projected to strengthen to 6.3 percent in 2020.
- Inflation projections:
- Inflation is projected at 1.6 percent by end-2019.
- Inflation is projected at 3 percent by the end of 2020.
- These projections fall within the 2-4 percent target range.
Risks to the outlook
- Near-term downside risks have increased, reflecting:
- Increased risks from global trade tensions.
- Shifts in global financial conditions.
- Natural disasters.
- Risk balance:
- Downside: rebound in GDP growth could be weaker than expected because of global trade tensions, related policy uncertainty, a change in global financial conditions, and natural disasters.
- Upside: structural reform progress and infrastructure improvements could boost confidence and growth.
Policy assessment and recommendations
- Fiscal policy:
- The small fiscal stimulus planned for 2020 is timely and appropriate in magnitude.
- Within the budgeted fiscal envelope, there is scope to expand and better target social spending and infrastructure.
- The Philippines has space for an expansionary macroeconomic policy response should downside risks materialize.
- Monetary policy:
- Macroeconomic policies have reacted appropriately to slowing growth and decreasing inflationary pressures.
- The recent cuts in the BSP’s policy rate are appropriate for achieving the inflation target in the next one to two years, barring any unforeseen events.
- Financial stability:
- With economic growth expected to pick up again, rapid credit growth may reemerge.
- The BSP should be prepared for macroprudential policy responses if renewed high credit growth poses risks to systemic financial stability.
Structural reforms and medium-term growth
- IMF staff highlighted strong structural reform momentum and passage of important bills, including:
- Rice tariffication.
- Tax reform.
- A national digital ID.
- Ease of doing business measures.
- BSP charter amendments.
- Recommendations to lift medium-term growth and promote inclusiveness:
- Speed up implementation of reforms.
- Continue tax reform.
- Relax restrictions on foreign investment.
- Broaden poverty reduction efforts.
- Ease the stringent banking secrecy law.
- Upgrade the capacity of public administration.
Concluding assessment
- Prudent macroeconomic management and strong structural reform momentum have made the Philippine economy more resilient, reinforced growth, and helped to reduce poverty.
- The IMF will continue to cooperate with the authorities through policy dialogue and support for the development of economic analysis and policy capacity.
Source: IMF Staff Completes 2019 Article IV Visit to Philippines (Press Release No. 19/422), November 18, 2019.