The International Monetary Fund (IMF) has commended the Philippines for its handling of the economy following the conclusion of the latest round of annual visits known as Article IV consultations.
The consultations ended Tuesday, 3 October 2023, after which the DBM issued a statement declaring the $404 billion southeast Asian economy as having emerged still strong from the pandemic.
According to the DBM, the IMF confirmed that “the Philippine economy has emerged from the pandemic strongly.”
“Fiscal consolidation as envisaged under the Medium-Term Fiscal Framework is on track, reflecting a strong revenue performance and lower current spending, and its pace is appropriate to bring the national government debt-to-GDP ratio to less than 60 percent over the medium term,” it said.
The debt-to-GDP ratio is an indicator of how an economy pays back its debt, an activity that tells on its capacity to deliver adequate basic government service to Filipinos and still have enough left for important public sector investments to underwrite future growth, for instance.
The IMF was also reported to have commended government efforts at tapping Public Private Partnerships (PPPs) as the program leads to more investments: “The renewed emphasis on financing the country’s infrastructure gaps through PPPs is well placed and the new PPP Code is welcome in this regard. The reform of the mining fiscal regime and Mining Act provides an opportunity to enact a progressive and unified tax system, and a competitive investment regime.”
It also highlighted the potential of the Maharlika Investment Corporation: “The Maharlika Investment Corporation (MIC) could contribute to the push for closing infrastructure gaps and green investments by following best practices in strategic investment management and accountability frameworks.”
The Bangko Sentral ng Pilipinas was also praised for its handling of the inflation crisis: “Decisive monetary tightening and moderate minimum wage hikes helped mitigate inflationary pressures, with headline inflation now expected to return to the BSP’s target band by the first quarter of 2024.”
The IMF attributed the country’s economic challenges to persistently high global inflation, an abrupt global slowdown putting downward pressure on goods and services exports, an intensification in geo-political tensions, and depreciation pressures stemming from capital outflows under volatile market conditions.
It recommended a more ambitious revenue mobilization strategy that would enhance social spending needed to achieve poverty reduction goals.
“Having bottomed out at the end of the second quarter, growth is projected to bounce back by year-end to 5.3 percent in 2023 and reach 6 percent in 2024, supported by an acceleration in public spending and improved external demand for Philippines exports,” IMF mission leader Jay Peiris said.
According to him, his is higher than the average ASEAN-5 growth outlook of 4.6 percent and 4.5 percent for 2023 and 2024, respectively.
