By LEE C. CHIPONGIAN
The International Monetary Fund (IMF) has a lower growth estimate for the ASEAN 5 trade grouping of 4.8 percent this year and 5.1 percent in 2021, both are 0.1 percentage point lower than previous forecast, as it also revised lower its global growth forecast.
The IMF released its January World Economic Outlook (WEO) Update and has revised lower its projections for global growth as well as for emerging and developing Asia, and ASEAN-5 which includes the Philippines, Indonesia, Malaysia, Thailand and Vietnam. The last WEO report was in October 2019.
“After slowing to 4.7 percent in 2019, growth in ASEAN-5 countries is projected to remain stable in 2020 before picking up in 2021. Growth prospects have been revised down slightly for Indonesia and Thailand, where continued weakness in exports is also weighing on domestic demand,” according to the IMF report.
For the Philippines, the IMF has a growth projection of 5.7 percent for 2019, and 6.3 percent for 2020 as of the last WEO as they expect an increase in government spending while the Bangko Sentral ng Pilipinas’ 75 basis points reduction in key rates last year is also a growth stimulant.
The IMF’s last assessment for the Philippines’ medium-term economic outlook remained “favorable, especially if the strong structural reform momentum continues.”
In the January WEO Update, the IMF said emerging and developing Asia, which includes China and India, will improve a little to 5.8 percent in 2020 from 6.5 percent in 2019, and further up to 5.9 percent in 2021. The projections for 2020 and 2021 are however 0.2 and 0.3 percentage point lower than the October WEO forecasts.
“The growth markdown largely reflects a downward revision to India’s projection, where domestic demand has slowed more sharply than expected amid stress in the nonbank financial sector and a decline in credit growth,” said IMF. Growth in China, in the meantime, is projected to slow down to 6.1 percent 2019 to six percent in 2020 and 5.8 percent in 2021. It said the “unresolved disputes on broader US-China economic relations as well as needed domestic financial regulatory strengthening are expected to continue weighing on activity.”
The IMF said global growth, projected to grow 2.9 percent in 2019, has a new projection of 3.3 percent in 2020 and 3.4 percent in 2021, both lower than October WEO’s estimates by 0.1 percentage point each.
“The main considerations for the global growth forecast from the backdrop of recent developments include: carryover from weaker-than anticipated second half outturns for 2019 among key emerging market economies; signs of tentative stabilization in manufacturing in the fourth quarter, but some weakening in still-resilient service sector activity; accommodative financial conditions; and uncertain prospects regarding tariffs, social unrest, and geopolitical tensions,” the IMF said.
During the IMF Staff assessment of the Philippine economy last November, it noted the following: that the small fiscal stimulus planned for 2020 is timely and appropriate in magnitude (but) within the budgeted fiscal envelope, however, there is scope to expand and better target social spending and infrastructure; the recent cuts in the BSP’s policy rate are appropriate for achieving the inflation target in the next one to two years, barring any unforeseen events; the Philippines has space for an expansionary macroeconomic policy response should downside risks materialize; and with economic growth expected to pick up again, rapid credit growth may reemerge.
“The BSP should be prepared for macroprudential policy responses if renewed high credit growth poses risks to systemic financial stability,” said the IMF.