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In its World Economic Outlook (WEO) report, the IMF added that the Philippines should show accelerated growth next year even though inflation, or the rate of change in prices, was also seen as accelerating.
Inflation, which averaged 4.7 percent last year, was seen moderating to only 3.4 percent this year but likely to rise again to 4.1 percent by next year.
Higher forecast inflation was in line with forecasts by such entities as Barclays Capital, HSBC and other experts anticipating price pressures resulting from rising food and energy prices in the Philippines.
Higher forecast growth, on the other hand, was based on continued growth in domestic demand, fed for the most part by money sent home by some 10 million overseas Filipinos whose combined foreign earnings this year were also seen growing by more or less 5 percent.
Consumption is a key growth driver for the Philippines and this development has raised concern among economists at the IMF who prescribed more investment activities happening over the near term to make long-haul growth sustainable.
The country’s economic managers, led by Finance Secretary Cesar Purisima, had been bullish about the country’s growth prospects, noting, for instance, the uptrend in revenue collection the past three years, collections seen translating to greater and more meaningful government service down the line.
This view was boosted by observations by Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., who noted revenue flows had gone up year-on-year by 7.5 percent in 2009 to P1.123 trillion and by 12.6 percent just last year to P1.359 trillion.
This development helped reduce the budget imbalance averaging 3.7 percent of GDP in 2009 to only 3.5 percent of GDP in 2010 and only 2 percent of GDP just last year.
The fiscal performance was noted by Moody’s Investor Service that said, “Much of the improvement [was attributable] to the progress made in fiscal consolidation by the new Aquino administration.”
Standard & Poor’s cited the “strength of the country’s external balance sheet,” while Fitch Ratings also noted the “progress on fiscal consolidation…, broadly favorable economic prospects and strengthening external finances,” which were comments inspired by the likelihood of a credit upgrade for the Philippines at some point in the near term.
Tetangco said weak economic prospects in the euro-area countries and in the United States helped boost the country’s foreign-exchange reserves as foreign capital shifted from developed market economies to emerging economies like the Philippines.
The continued strengthening of the external sector helped sustain the continued flow of foreign capital supplementing locally generated investments and other activities generating even more growth potential for the Philippines down the line, Tetangco said.
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