Laggard?

ACCORDING to The International Monetary Fund (IMF), the Philippines would be the laggard in economic growth from 2012-2013 among its counterparts in the Association of Southeast Asian Nations-5 (ASEAN-5).
The IMF’s latest World Economic Outlook (WEO) showed that the Philippines’ gross domestic product (GDP) “would grow 4.2 percent this year and 4.7 percent in 2013 after slackening to 3.7 percent last year from 7.6 percent in 2010 due to weak global trade and cautious spending by the Aquino government,” reported Philstar.com, with projected growth “slower than Indonesia’s 6.1 percent, Vietnam’s 5.6 percent, Thailand’s 5.5 percent and Malaysia’s 4.4 percent.”
For 2013, the country’s GDP forecast is also lower compared to Thailand’s 7.5 percent, Indonesia’s 6.6 percent and Vietnam’s 6.3 percent. However, it will be at par with Malaysia’s 4.7 percent, Philstar.com reported further.
“The IMF sees the GDP in ASEAN-5 expanding by 5.4 percent this year and 6.2 percent next year from 4.5 percent last year. The multilateral lender sees the GDP in Asia growing six percent this year and 6.5 percent next year from 5.9 percent last year as activity across the region slowed during the last quarter of 2011, reflecting both external and domestic developments.”
In March, IMF mission chief for the Philippines Vivek Arora said that “the country would likely regain its potential growth rate of about five percent starting next year, after slackening last year due to weak global trade.”
Fiscal stimulus, as well as the monetary policy stance of the Bangko Sentral ng Pilipinas (BSP) and strong remittances are expected to boost domestic demand, Arora said.
IMF’s latest outlook shows the Philippines’ inflation easing to 3.4 percent this year then rising to 4.1 percent next year, from 4.8 percent in 2011.
It’s also projected that by 2013, the average inflation of the country will be slower than Vietnam’s 6.8 percent and Indonesia’s 6 percent but faster than Malaysia’s 2.5 percent and Thailand’s 3.3 percent.
“The IMF pointed out that the world growth economic prospect is expected to improve in the second half of the year as a result of the combined policy measures taken across developed and emerging market economies,” Philstar.com reported.
“There are various factors behind that. This is occurring in an environment where global growth is pretty weak. What is supporting growth is basically strong domestic demand, strong government consumption, remittances and the implementation of various public-private partnerships (PPPs),” said Abdul de Guia Abiad, deputy division chief of the World Economics Studies Division of IMF.
“You are not going to see a sudden increase in the growth rate of the Philippines…A lot of this requires structural reforms to increase the potential rate of growth. In terms of the Philippines’ performance relative to its neighbors, a key element is basically strengthening investment, both infrastructure investment by the public sector, and also improving the business climate so the private investment strengthens,” he added.
However, Abiad said that the Aquino government is on the right track with its “good governance housecleaning campaign” and that “it is doing a lot of the right things in terms of public finance management.”
He also said that the country’s monetary policy “has been conducted in a good manner.”
Nonetheless, Malacañang remains optimistic that the country would be able to hurdle the forecast made by the IMF.
Presidential Communications Development and Strategic Planning Office Secretary Ricky Carandang said: “I believe the IMF will be surprised when our gross domestic product (GDP) growth exceeds their targets. We’re looking at five to six percent growth. In any case, what’s equally important as the growth is the fact that it is being felt by a greater portion of the population,” citing factors as the government’s accelerated infrastructure spending, tourism development and higher agricultural production which would help significantly to the country’s growth.
There have also been optimistic reports on the economic front which include:
– Export growth in February reported at 14.6 percent — the highest growth since April 2010 driven by a rebound in electronics shipments, boosting hopes for stronger economic growth this year.
– The amount of foreign direct investments (FDI) in January 2012 was at $766 million, compared to only $214 million for the same period in 2011.
According to Asian Development Bank’s annual Asian Development Outlook for 2012, “forecasts for 2012 and 2013 assume that the government will raise spending, follow through on its commitment to improve the business environment and carry out some of the planned public-private partnerships, which include airports, highways and water supply operations.”
In his article, “Why economic forecasting goes awry,”Stephen Gordon of Theglobeandmail.com writes: “Economic forecasts are almost always wrong – often wildly so.”
“Forecasters who work outside academia don’t have the time or resources to give more than cursory attention to these issues, so they rely on a mix of models and subjective opinion to produce their projections. There’s nothing wrong with using intuition in a forecast, but its contribution should be transparent,” Gordon further elaborates.
The Jakarta Globe also reported that Indonesia’s senior ministers “dismissed the IMF’s forecast of 4.8 percent economic growth for the nation” in 2013, asserting that the Indonesian government will “stick to its target of 5 percent to 5.5 percent.”
“Forecasts can be wrong, it’s not unusual,” said Hatta Rajasa, Coordinating Minister for the Economy. He referred to the IMF’s June revision of its 2009 growth forecast, where it raised the forecast form 2.5 percent to 3.4 percent, reported The Jakarta Globe.
While economic forecasts may be based on factual data, they are still predictions. For nations who have been given a bleak economic prognosis for 2012-2013, the IMF’s economic forecast should serve as a challenge – one that can still be overcome.
(www.asianjournal.com)
(LA Weekend April 21-24, 2012 Sec A pg. 12)