U.S. SLOWDOWN AS EXPORT MARKET WON'T AFFECT RP, SAYS IMF
MANILA, APRIL 14, 2007 (STAR) By Des Ferriols - The declining share of the US as an export market will cushion the Philippines from the slowdown in the US economy, the International Monetary Fund (IMF) said in its World Economic Outlook released yesterday.
The IMF said the Philippines had been weakened by the string of typhoons in the last quarter of 2006 but the country’s underlying momentum remained strong for this year.
According to the IMF, the performance of Southeast Asian nations has been varied but the growth prospects of the region is now being assessed based on how a sharper-than-expected slowdown in the United States would affect the region.
The IMF said in its report that while demand for Asian exports would be affected, several factors suggest that the overall impact is likely to be relatively well contained
"At this stage, the US slowdown is being driven by the housing sector, with its effects on overall demand for exports from Asia likely to be muted," the IMF said.
In contrast, the Fund said that the global demand for electronic goods, which was important for regional exports, particularly in countries like the Philippines, remained generally well supported despite some moderation toward late 2006.
The IMF said that the importance of the United States as a destination for exports has been declining in most countries, except for China which has been increasing its exports to the US.
The Fund said that intraregional trade has been rising and this would make up for the slack in the US market.
"Against this background, the near-term outlook for growth in the region remains very positive," the IMF said, saying that real GDP growth was expected to ease this year and next, but remain at a high level.
For the Philippines, the IMF retained its original projection that the country’s GDP would grow by 5.8 percent this year.
The IMF said a pickup was expected in the ASEAN-4 economies as the effects of earlier monetary tightening begin to fade. Growth could be undercut, however, should the slowdown in demand for Asian exports be sharper than expected.
The IMF said it was also encouraging that the recent rise in market volatility in Thailand has not spread when the Thai authorities decided to impose controls on capital inflows.
However, the IMF said countries like the Philippines which still has considerable public debt levels, should continue to secure sustainable fiscal positions.
Despite the substantial progress made in reducing debt over the last few years, the IMF said the Philippines should ensure that its fiscal position remained steady, with the deficit under control and public debt continuing to go down.
"Comprehensive spending and revenue reforms, including removal of exemptions to corporate income taxes and excise duties and the elimination of nonessential subsidies, could help achieve consolidation goals while creating space for priority spending," the IMF said.
Chief News Editor: Sol Jose Vanzi
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