(STAR) By Des Ferriols - Bangko Sentral ng Pilipinas (BSP) officials said foreign investors remained optimistic about the country’s economic prospects despite the anticipated slowdown in the US economy in the next few years.

Returning from the annual meeting of the International Monetary Fund and the World Bank (WB) in Washington, BSP Governor Amando M. Tetangco Jr. said the feedback on the country’s economic prospects were positive.

Tetangco said he met with different business and investment groups abroad and even at the time of the Ayala Mall blast, sentiments were optimistic.

“In our meetings, both the IMF and the WB also recognized the positive performance of the Philippine economy,” he said. “Investors remain optimistic and this was expressed in various meetings with different groups.”

Tetangco said this was consistent with the evident and sustained strength of portfolio and direct investments into the country as well as the prevailing optimism even among local investors.

Tetangco cited the results of various surveys conducted by the BSP indicating that for every 10 respondents, those who were confident about the macroeconomy outnumbered those who were not by four.

“The overall business confidence index (Cl) for the third quarter of 40.9 percent was higher by 19.2 index points compared to the year ago level,” he said.

In its World Economic Outlook, however, the IMF said growth is expected to surge this year but the economic momentum would slowdown in 2008.

The Fund noted that growth accelerated in Singapore where consumption and investment strengthened; as well as the Philippines where record remittance inflows boosted consumption while government spending grew strongly.

However, the IMF said the effects of global market volatility would lead to a slowdown in exports to developed economies and against this background, the growth projections for 2008 have been revised.

The IMF expects the Philippines’ gross domestic product (GDP) to rise by 6.3 percent this year but this would slow to 5.8 percent in 2008.

“The newly industrialized Asian economies are expected to be most affected by the weaker US outlook,” the IMF said.

Among the ASEAN economies, the IMF expects some rebound in Thailand but modest slowdowns are expected in Malaysia and the Philippines.

“Large foreign exchange inflows present opportunities to boost investment and growth, but they also create short-term challenges,” the IMF report said.

However, the IMF said current policies have generally steered a path between maintaining external competitiveness, limiting risks of overheating, and preparing for their possible reversals.

The IMF said inflation rate in the Philippines, specifically, remained low despite earlier upward pressures while the pace of credit growth also slowed down.

Declining inflation rate, according to the IMF, has also allowed the BSP to cut interest rates.

“Looking forward, policymakers will need to respond flexibly to future foreign exchange flows,” the IMF said.

Chief News Editor: Sol Jose Vanzi

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