AT a time when so much is happening in the nation’s political life, including unexpected leadership changes in Congress, it is good to have the International Monetary Fund (IMF) finding that the country is maintaining its strong economic growth.
The IMF cited the expansion of the country’s Gross Domestic Product (GDP) by 6.7 percent in 2017 and projects this to be sustained in 2018 and 2019. It cited increased public consumption and investments, both public and private. Foreign direct investments reached a record level of $10 billion in 2017.
On the other hand, the IMF cited the following negative factors affecting the Philippine economy: depreciation of the peso by about 7 percent against the US dollar since the start of 2018, rising international oil prices, the effects of increased excise taxes (from the recent TRAIN law), leading to inflation of 5.2 percent this June, and the country’s current account deficit is expected to exceed to rise by 1.5 percent by year-end due to increased imports of capital goods and raw materials.
The visiting IMF team leader, Luis E. Breuer, stressed the need for the country to “strike the right balance between growth and macroeconomic stability.” He urged the government to adjust its policies “to reduce inflationary pressures while structural reforms should continue to support inclusive growth.”
The IMF’s words of caution on “inflationary pressures” refer to the rising prices that have hounded ordinary Filipino consumes these last few months. It cited the following factors behind the rising prices: rising international oil prices, external pressures on the peso, effects of higher excise taxes, and domestic demand pressures.
Local critics have called on the government to suspend the TRAIN law, particularly its imposition of excise taxes on diesel, but government economists say the bigger cause of rising domestic consumer prices are rising world oil prices and the depreciation of the peso. The TRAIN law, therefore, is not expected to be stopped anytime soon. It is part of a series of measures designed to reform the country’s tax system.
The IMF has limited its advice to words of caution – to the need to strike the right balance between growth and stability. Should the rising prices ever reach a level threatening stability – in particular, the stability of common, ordinary families – we are certain the government is ready to heed the IMF’s words of caution which it gave along with its words of praise.
