THE International Monetary Fund (IMF) on Tuesday raised its growth forecast for the Philippine economy this year as the country bounced back in the latter part of 2020.
Yongzheng Yang, IMF resident representative to the Philippines, cited the April 2021 update of the Washington-based financial institution’s World Economic Outlook (WEO) in saying the country’s gross domestic product (GDP) is now seen to grow at 6.9 percent.
This was an upward revision from the 6.6-percent GDP growth that the IMF projected in January.
It was also higher than the 6.5 to 7.5 percent official growth target of the government.
In updating its growth projection, the IMF noted the Philippine economy ended 2020 with “stronger-than-expected” growth in the fourth quarter.
“This momentum signals a stronger recovery this year,” Yang said in an e-mail response.
“The increased fiscal stimulus in the 2021 budget should also help boost economic activity.”
“Taking into account the unused Bayanihan II funds to be disbursed this year and carry-over funds from the 2020 budget, government spending in 2021 is likely to be higher than anticipated in our January WEO forecasts,” he added.
Bayanihan II is the Republic Act 11494, or the “Bayanihan to Recover as One Act,” which covered assistance to disadvantaged or displaced workers during the coronavirus pandemic; grants to cities, municipalities and provinces; and purchase of coronavirus detection kits, among others. The law expired on June 25 last year.
Yang, however, said their forecasts are subject to substantial uncertainty.
“In particular, recent hikes in virus infections pose a significant downside risk, as tightening quarantine measures could dampen economic activity,” he said.
“It is thus critical to bring the current spikes of virus infections under control, including by strengthening containment measures and accelerating vaccinations,” he added.
Yang said other downside risks to the economy include slower-than-expected vaccinations, geopolitical and trade tensions, and potential volatility in global financial markets.
On the upside, he said the latest US fiscal stimulus and the much-discussed infrastructure initiative, if materialized, could bolster US import demand from the rest of the world, including the Philippines.