{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with the Philippines",
  "publication": "IMF News, August 6, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/08/04/pr21243-philippines-imf-executive-board-concludes-2021-article-iv-consultation",
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  "summary": "Real GDP contracted by 9.6 percent in 2020; a moderate recovery started in Q3 2020 but the second COVID‑19 wave in early 2021 likely slowed recovery in the first half of 2021.",
  "publishDate": "2021-08-06",
  "sections": [
    {
      "heading": "Economic developments and outlook",
      "content": "- Real GDP contracted by 9.6 percent in 2020; a moderate recovery started in Q3 2020 but the second COVID‑19 wave in early 2021 likely slowed recovery in the first half of 2021.\n- CPI inflation averaged 4.4 percent through June 2021, above the authorities’ target band of 2 to 4 percent, primarily reflecting food supply shocks and pandemic‑related transportation supply restrictions.\n- A sharp import compression in 2020 resulted in a current account surplus of 3.6 percent of GDP in 2020.\n- Vaccination has started and is poised to accelerate from midyear.\n\n- Projections:\n  - Real GDP: 5.4 percent in 2021 and 7.0 percent in 2022.\n  - Medium‑term economic growth: return to pre-pandemic rate of 6.5 percent.\n  - Headline inflation: expected to decrease to 3.3 percent by end‑2021 and reach the mid-point of the target band over the medium term.\n  - Current account: surplus expected to narrow in 2021 and reach a deficit of 1.8 percent of GDP in the medium term.\n\n- Risks:\n  - Risks to the outlook are larger than usual and tilted to the downside, given risks of a protracted pandemic and uncertainty around the vaccine program.\n  - Banks face rising asset quality risks despite strong capital and liquidity buffers."
    },
    {
      "heading": "Executive Board assessment and policy guidance",
      "content": "- Commendations and overall stance:\n  - Directors commended the authorities’ comprehensive policy response to the COVID‑19 pandemic, which helped cushion its socio-economic impact and maintain macro-financial stability.\n  - Strong fundamentals and prudent macroeconomic policies were noted as helping to maintain macro-financial stability.\n  - Directors underscored the importance of continuing supportive macroeconomic policies and prioritizing health policy responses to sustain the recovery.\n\n- Fiscal policy:\n  - Directors agreed the expansionary fiscal stance strikes an appropriate balance between recovery needs and fiscal prudence, with priority given to health, social, and infrastructure spending.\n  - They noted the Philippines has some fiscal space to respond flexibly if downside risks materialize.\n  - Directors welcomed the authorities’ commitment to fiscal consolidation and emphasized benefits of adopting a medium-term fiscal strategy centered on revenue mobilization and expenditure control to anchor commitments.\n  - Encouraged continued efforts to enhance fiscal transparency and accountability, including procurement procedures.\n\n- Monetary and external sector policy:\n  - Given economic slack and the inflation outlook, Directors agreed the monetary policy stance should remain accommodative and data driven, mindful of financial stability risks.\n  - Recommended gradually phasing out direct budgetary financing to safeguard the central bank’s operational capacity and independence.\n  - A clear communication strategy would help enhance monetary policy effectiveness as normalization begins.\n  - Observed that the large current account surplus in 2020 (leading to a large buildup of foreign reserves) is likely temporary; the exchange rate can play an important role in absorbing external shocks.\n\n- Financial sector and supervision:\n  - Adequate credit provisioning and measures to strengthen prudential supervision remain important to preserve banking system soundness.\n  - Recommended allowing regulatory forbearance to expire as scheduled and saw merit in limiting dividend payouts to allow for capital retention when needed.\n  - Underscored urgent need to strengthen the bank resolution framework and enhance AML/CFT implementation, in line with the 2021 FSAP recommendations.\n  - Called for steadfast efforts to facilitate swift exit from the FATF grey list to reduce the risk of disruptions to cross-border financial flows.\n\n- Structural and social policies:\n  - Directors welcomed emphasis on structural reforms to improve the business environment and foster sustainable, inclusive, and greener growth.\n  - Stressed importance of investment in training and education to facilitate sectoral reallocation.\n  - Encouraged efforts to increase spending on social protection, strengthen public service delivery, and implement climate-related initiatives."
    },
    {
      "heading": "Philippines: Selected Economic Indicators (highlights)",
      "content": "- Real GDP (annual percent change): 2017: 6.9; 2018: 6.3; 2019: 6.1; 2020: -9.6; 2021: 5.4 (Proj.); 2022: 7.0 (Proj.).\n- Consumption (annual percent change): 2019: -5.2; 2020: 4.5.\n  - Private consumption: 2019: -7.9; 2020: 3.4; 2021: 6.4.\n  - Public consumption: 2019: 13.4; 2020: 9.1; 2021: 10.5; 2022: 9.9; 2022 (alternate line) 9.6.\n- Gross fixed capital formation: 2019: 3.9; 2020: -27.5; 2021: 5.6; 2022: 10.3.\n- Final domestic demand: 2019: 5.7; 2020: -10.6; 2021: 4.7; 2022: 7.7.\n- Net exports (contribution to growth): 2019: -0.2; 2020: 4.0; 2021: 0.2; 2022: -1.4.\n- Real GDP per capita growth: 2017: 5.2; 2018: 4.6; 2019: -10.8; 2020: 3.8.\n- Output gap (percent, +=above potential): 2017: 0.4; 2018: -0.1; 2019: -8.6; 2020: -3.9; 2021: -0.7.\n- Unemployment rate (percent of labor force): 2017: 5.3; 2018: 5.1; 2019: 10.4; 2020: 7.6.\n- Underemployment rate (percent of employed persons): 2017: 16.1; 2018: 16.4; 2019: 13.8; 2020: 16.2.\n- Consumer prices (period average): 2017: 2.9; 2018: 2.5; 2019: 2.6; 2020: 4.2; 2021: 3.0.\n- Consumer prices (end of period): 2017: 3.5; 2018: 3.3.\n- 3-month PHIREF rate (benchmark rate for the peso floating leg of a 3-month interest rate swap): 2017: 1.3.\n- Claims on private sector (in percent of GDP): 2017: 45.6; 2018: 47.6; 2019: 48.0; 2020: 51.9; 2021: 48.5.\n- Public finances (in percent of GDP):\n  - National government overall balance (IMF definition): 2017: -2.1; 2018: -3.1; 2019: -3.4; 2020: -7.6; 2021: -7.7.\n  - Revenue and grants: 2017: 14.9; 2018: 15.5; 2019: 15.9; 2020: 15.4.\n  - Total expenditure and net lending: 2017: 17.1; 2018: 18.7; 2019: 19.5; 2020: 23.6; 2021: 24.5; 2022: 23.1.\n  - General government gross debt: 2017: 38.1; 2018: 37.1; 2019: 37.0; 2020: 57.7; 2021: 60.2.\n- Balance of payments (in percent of GDP):\n  - Current account balance: 2017: -2.6; 2018: -0.8; 2019: 3.6; 2020: -1.8.\n  - Total external debt: 2017: 22.3; 2018: 22.8; 2019: 22.2; 2020: 27.2; 2021: 25.0; 2022: 24.4.\n- Gross reserves:\n  - Gross reserves (US$ billions): 2017: 81.6; 2018: 79.2; 2019: 87.8; 2020: 110.1; 2021: 103.6; 2022: 98.3.\n  - Gross reserves (percent of short-term debt, remaining maturity): 2017: 419.3; 2018: 364.9; 2019: 398.3; 2020: 552.6; 2021: 508.3; 2022: 459.0.\n- Memorandum items:\n  - Nominal GDP (US$ billions): 2017: 328.5; 2018: 346.8; 2019: 376.8; 2020: 361.5; 2021: 400.6; 2022: 433.6.\n  - Nominal GDP per capita (US$): 2017: 3,153; 2018: 3,280; 2019: 3,512; 2020: 3,323; 2021: 3,628; 2022: 3,867.\n  - GDP (in billions of pesos): 2017: 16,557; 2018: 18,265; 2019: 19,518; 2020: 17,939; 2021: 19,390; 2022: 21,320.\n  - Real effective exchange rate (2010=100): 2017: 103.4; 2018: 100.5; 2019: 105.4; 2020: 111.5.\n  - Peso per U.S. dollar (period average): 2017: 50.4; 2018: 52.7; 2019: 51.8; 2020: 49.6.\n\nIMF Executive Board concluding statement for the 2021 Article IV consultation with the Philippines.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Philippines and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/08/04/pr21243-philippines-imf-executive-board-concludes-2021-article-iv-consultation"
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    "Published: August 6, 2021",
    "Real GDP contracted by 9.6 percent in 2020; a moderate recovery started in Q3 2020 but the second COVID‑19 wave in early 2021 likely slowed recovery in the first half of 2021.",
    "CPI inflation averaged 4.4 percent through June 2021, above the authorities’ target band of 2 to 4 percent, primarily reflecting food supply shocks and pandemic‑related transportation supply restrictions.",
    "A sharp import compression in 2020 resulted in a current account surplus of 3.6 percent of GDP in 2020.",
    "Vaccination has started and is poised to accelerate from midyear.",
    "Projections:",
    "Risks:",
    "Commendations and overall stance:",
    "Fiscal policy:",
    "Monetary and external sector policy:",
    "Financial sector and supervision:",
    "Structural and social policies:",
    "Real GDP (annual percent change): 2017: 6.9; 2018: 6.3; 2019: 6.1; 2020: -9.6; 2021: 5.4 (Proj.); 2022: 7.0 (Proj.).",
    "Consumption (annual percent change): 2019: -5.2; 2020: 4.5.",
    "Gross fixed capital formation: 2019: 3.9; 2020: -27.5; 2021: 5.6; 2022: 10.3.",
    "Final domestic demand: 2019: 5.7; 2020: -10.6; 2021: 4.7; 2022: 7.7.",
    "Net exports (contribution to growth): 2019: -0.2; 2020: 4.0; 2021: 0.2; 2022: -1.4.",
    "Real GDP per capita growth: 2017: 5.2; 2018: 4.6; 2019: -10.8; 2020: 3.8.",
    "Output gap (percent, +=above potential): 2017: 0.4; 2018: -0.1; 2019: -8.6; 2020: -3.9; 2021: -0.7.",
    "Unemployment rate (percent of labor force): 2017: 5.3; 2018: 5.1; 2019: 10.4; 2020: 7.6.",
    "Underemployment rate (percent of employed persons): 2017: 16.1; 2018: 16.4; 2019: 13.8; 2020: 16.2.",
    "Consumer prices (period average): 2017: 2.9; 2018: 2.5; 2019: 2.6; 2020: 4.2; 2021: 3.0.",
    "Consumer prices (end of period): 2017: 3.5; 2018: 3.3.",
    "3-month PHIREF rate (benchmark rate for the peso floating leg of a 3-month interest rate swap): 2017: 1.3.",
    "Claims on private sector (in percent of GDP): 2017: 45.6; 2018: 47.6; 2019: 48.0; 2020: 51.9; 2021: 48.5.",
    "Public finances (in percent of GDP):",
    "Balance of payments (in percent of GDP):",
    "Gross reserves:",
    "Memorandum items:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Philippines and the IMF](http://www.imf.org/external/country/PHL/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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