BY PAOLO LUIS G. MONTECILLO, Reporter
THE INTERNATIONAL MONETARY FUND (IMF) no longer expects the Philippines to grow this year, noting the substantial impact — albeit less harsh than in advanced economies — of the global economic downturn.
Government officials discounted the forecast, however, pointing to signs of export improvements. A foreign analyst, meanwhile, said multilateral institutions were fixated on tying economic recoveries to an upturn in the United States.
In its latest World Economic Outlook where the country’s growth forecast was cut to zero percent from 2.25% previously, the Washington-based lender said the Asian region was being "severely hit by the combined effects of lower global demand and tighter credit conditions."
The same prognosis of zero growth was applied as a whole for five Association of Southeast Asian Nations (ASEAN-5) economies but the IMF’s Manila representative, Denis Botman, stressed "the Philippines remains one of the few countries in Asia to avoid [a] recession in 2009".
For the world’s advanced economies a 3.8% contraction was forecast, while for newly industrializing neighbors Korea, Taiwan, Hong Kong, and Singapore an overall decline of 5.6% was predicted.
The global economy is now expected to contract by as much as 1.3%, down from a 0.5-1.0% decline projected last month.
The IMF forecast is the latest in a series of growth downgrades for the country, among them Fitch Ratings’ 0.5% (from 2.0%) and the government’s own target of 3.1-4.1% from an earlier, and already reduced, 3.7-4.4%.
Indonesia and Vietnam were the only two ASEAN-5 countries expected to grow this year, by 2.5% and 3.3%, respectively. At the other end were Thailand and Malaysia which were forecast to suffer 3.0% and 3.5% contractions, respectively.
All five, however, are expected to grow next year, with the Philippines seen posting a modest 1% gain, the lowest among the ASEAN-5.
Government officials, for their part, said there was little reason for the economy to stagnate this year.
Noting that the first quarter result is expected to be at least 2.1%, National Economic and Development Authority deputy director general Augusto B. Santos said "The country will have to contract for the next three quarters" for zero growth to be achieved.
"There are already signs that the US economy is recovering. That is our biggest export market," he said. "Definitely, there will be a [growth] slowdown, but a contraction is unlikely."
HSBC economist Frederic Neumann, meanwhile, said the economy could still manage to gain, by at least 1% this year and somewhere between 3-4% next year.
The IMF forecast, he said, is "too conservative."
"Multilateral institutions are very skeptical on the view that markets could not grow without the US. But we think there is a genuine growth in domestic demand in Asian economies," he told a briefing yesterday.
"I think people were taken ... with [the speed at] which the recession spread [from] the US. But they forget that there are underlying forces which lead to a fundamental disengagement of the emerging markets from the developed world."
Another economist, meanwhile, said zero growth would mean more people going hungry given the country’s relatively high population growth.
"The effect is poverty is going to increase — and hunger of course," University of the Philippines economist and former Budget Secretary Benjamin E. Diokno said.
Despite the "early signs" of economic recovery in the US, an uptick in consumption is still not expected to shore up demand for exports. "The consensus is that it is going to be a weak recovery [for exports]. We cannot expect that consumption will go back up just like that," Mr. Diokno said.
Presidential economic adviser Jose "Joey" C. Salceda also expects growth lower than the official government targets, but is not as pessimistic the IMF.
"I think growth will stay in the sub-2% level, which is technically a recession since this is slower than the population growth," he said yesterday.
A "meaningful" recovery to pre-crisis levels, he said, will have to wait three more years.
The IMF’s Mr. Botman, meanwhile, told reporters that the downward revision came with prospects of continued export demand weakness and a projected 7.5% decline in remittances (from flat growth previously).
But "despite the projected decline in remittances, private consumption growth is expected to remain relatively robust as a result of lower inflation and commodity prices, offsetting the negative contribution to growth from investment and net exports," he said.
"We see a slowdown in private consumption, but it will continue to be positive, with a 2.7% growth, and contribute to growth in 2009 and 2010," he said.
"[Also], it cannot be excluded that OFWs (overseas Filipino workers) rise to the occasion once again," he said.
He said the government’s adjustment of the deficit ceiling for the year was "appropriate" and called for a "modest" expansionary economic policy up to next year. — with a report fromGerard S. dela Peña
