The Philippines could grow well above 5% this year, International Monetary Fund (IMF) Managing Director Christine Lagarde said on Friday as she noted the “excellent economic stewardship” that has steered the country through continued global troubles.
“I know that the growth in 2012 will be well in excess of 5%. And we are certainly looking forward to 2013 being in the range of 5% as well. This is due in no little part to ... a combination of sound fiscal policy as well as sound monetary policy,” Ms. Lagarde said in a press conference in Manila.
The IMF’s official gross domestic product (GDP) projections for the Philippines are 4.8% for this year and 5% for 2013, while the government is targeting ranges of 5-6% and 6-7%, respectively. As of the first semester, economic growth was a higher-than-target 6.1%.
Ms. Lagarde’s pronouncements would mean the country’s sustaining its growth trajectory -- GDP has grown by an average of 5% in the last decade -- despite the global economic downturn. She stressed, though, that these gains must be made more inclusive, especially as some 42% of Filipinos still live on less than $2 a day.
“Certainly, looking ahead, we share the government view that growth must benefit the broader section of population ... inclusive growth is more sustainable, and it really is to the credit of this government ... that inequalities can be reduced,” she said.
The IMF chief was in the country as part of a tour of Asia. She made a courtesy call to Vice-President Jejomar C. Binay on Friday -- President Benigno S.C. Aquino III called in sick at the last minute -- accompanied by Finance Secretary Cesar V. Purisima, Budget Secretary Florencio B. Abad and Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.
Ms. Lagarde, the first female to take on the top post of the IMF since its founding in 1945, then visited private sector representatives, particularly asking to meet women business leaders.
She is set to fly out to Cambodia to attend the East Asia Summit this weekend but her stay will be cut short so she can catch a eurogroup meeting in Belgium on Tuesday, where finance ministers are expected to continue debt negotiations with Greece.
Talks are tense as the IMF and the eurogroup disagree on the timeline for Greece to reduce its debt to 120% of its GDP. The IMF stands by the original deadline of 2020, while European finance ministers hope to move it to 2022. Greece cannot be granted its bailout funds of Ä31.3 billion until the issue is resolved.
“It’s not over until the fat lady sings, as the saying goes ... It’s a question of working hard, putting our mind to it, making sure we’ve focused on the same objective which is that ... Greece can operate on a sustainable basis, can recover, can get back on its feet and can re-access market as early as possible,” Ms. Lagarde said.
With debt negotiations protracted, the global economy could continue to look to the Philippines and Asia for growth. The region could take a pivotal role in years to come, she added, serving as the growth engine that will stabilize other countries.
Advanced economies could also learn from Asia how they can pull out of a deep financial crisis, Ms. Lagarde said.
The region must now turn its focus to integration, she said, since closer trade and finance cooperation will be key to keeping the growth momentum. Ms. Lagarde urged the Association of Southeast Asian Nations (ASEAN) to pursue its planned integration by 2015, amid reports the deadline could be delayed.
“Integration is a major factor that has helped improve standard of livings, lift people out of poverty, increase the contribution of the region to global growth,” she said. “If it’s a matter of a few months’ worth of negotiations so details can be worked out and non-trade barriers need to be identified, then so be it. But, the sooner the better.”
Ms. Lagarde also revealed that the IMF is reviewing its official stance towards capital flows to take into account the threat to emerging economies.
Investors have flocked to emerging markets in search for better yields as advanced economies struggle. The surge in portfolio investments can cause exchange rate volatility and asset price bubbles, and can trigger instability when the funds are abruptly pulled out.
“It’s obviously an important [issue] because we have seen capital flows in and out of countries and significant consequences as a result, particularly in terms of appreciation,” she said.
“Certainly, our position is very much based on the latest development that we are observing at the moment and will be settled very shortly, probably with a view to being more flexible than we have been historically.”
The IMF has historically opposed capital controls. It instead prefers macroprudential measures that discourage capital flows, such as building up international reserves, lowering policy rates and reducing government borrowing.
Sought for comment, the BSP’s Mr. Guinigundo interpreted a “more flexible” stance to mean “an open mind on what tools to use.”
Monetary and fiscal policy could act as the first line of defense, macroprudential measures second and, finally, capital controls -- holding periods, taxes, reserve requirements on dollar deposits -- as the last.
“The IMF would not likely call such varied capital flow management measures as heretic but I guess unique individual country circumstances should be considered and when warranted, by all means endorse them,” Mr. Guinigundo said in a text message.
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