The Philippines would likely miss its medium-term economic growth target of 7-8 percent, the International Monetary Fund (IMF) said on Friday, given downside risks from rising inflation, volatile capital flows and Sino-US trade tensions.
Growth would probably hit 6.5 percent in 2018, the IMF said, weaker than its July forecast of 6.7 percent, before picking up to 6.7 next year. "The economy continues to perform well but is facing new challenges," the IMF said in a statement issued following its regular "Article 4" review of the Philippine economy.
Inflation this year is forecast to breach the central bank's 2-4 percent target and stay in the upper half of the range in 2019 and 2020, the IMF said, which should warrant further policy tightening by the Bangko Sentral ng Pilipinas.
To limit overheating risks and avoid overburdening monetary policy, the IMF urged the government to adjust its budget deficit targets to make it "neutral" rather than expansionary.
A neutral fiscal stance would imply a lower budget deficit equal to 2.4 percent of gross domestic product this year and 2.5 percent next year, compared with the government's 3 percent and 3.2 percent targets for 2018 and 2019, the IMF said.