IMF says PH economy to grow by just 5.7% this year

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The International Monetary Fund joins other global institutions in slashing its growth forecast for the Philippines to an eight-year low, bogged down by the budget delay and slower growth among foreign trade partners.

Metro Manila (CNN Philippines, October 16) — The International Monetary Fund (IMF) joined other global institutions in slashing its growth forecast for the Philippines to the slowest in eight years.

The Washington-based lender said the Philippine economy will likely expand by just 5.7 percent in 2019, according to its latest World Economic Outlook published Tuesday. This is a sharp slowdown compared to the 6.5 percent estimate it gave back in April, and would be the slowest annual expansion for the Philippines since 2011 at 3.7 percent.

"The latest growth forecast takes into account the slower-than-expected growth outcome in the second quarter of 2019, which was partly due to the budget delay. In addition, the forecast reflects a worsening external environment, with slowing growth in many trading partners," IMF Country Representative Yongzheng Yang told CNN Philippines in an e-mail.

Multilateral lenders Asian Development Bank and the World Bank have earlier scaled down growth forecasts to just 5.8 percent, citing challenges on government spending. All three institutions are certain that the 6-7 percent growth goal will be missed, with the lenders blaming the delayed approval of the 2019 budget which pushed back the implementation of state projects and programs.

Economic managers blamed the four-month delay in enacting the ₱3.7-trillion national budget for the anemic 5.5 percent growth from January to June. Officials are now implementing a bold catch-up plan to boost spending during the remaining months of the year.

READ: 'Politicking' over 2019 budget left more Filipinos poor, unemployed – Dominguez

The IMF's latest projection will keep the Philippines as the second-fastest growing economy compared to its neighbors, next to Vietnam's 6.5 percent. Indonesia, Thailand and Malaysia also saw growth forecasts slashed in the October report.

Growth in Emerging and Developing Asia – dubbed as the "main engine" of the world economy — is projected to ease to 5.9 percent this year coming from 6.4 percent in 2018. Global growth is seen at 3 percent, a slip from last year's 3.6 percent climb amid a "substantially" weaker global manufacturing and rising trade and geopolitical tensions.

"With uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize," the IMF report read, noting that such tensions should be diffused to boost economic activity.

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The growth forecast for China has been trimmed to 6.1 percent, while the US estimate was increased slightly to 2.4 percent compared to April.

Despite these, the IMF sees economic activity picking up by 2020. The Philippines is projected to expand by 6.2 percent, although below the 7-8 percent goal for the year.

"Growth will continue to be driven by domestic demand—steady growth in consumption and a pick up in public investment over time. Continued implementation of structural reforms will help boost business confidence and hence investment," Yang added.

Emerging Asia is seen growing by 6 percent, while world output is seen improving to 3.4 percent next year.