I-M-F LAUDS PH ECONOMIC GAINS BUT SAYS IT HASN’T TRICKLED DOWN TO NEEDY PINOYS

The IMF announced this morning the results of Article IV consultations (concluded last March 29) with the Philippines – and while they expressed satisfaction with the country’s impressive economic gains, they noted it’s not trickling down to Filipinos who need them the most.

It’s Spring in Washington DC and as surely as the blooming of delicate cherry blossoms, the world’s top financial managers are making their yearly pilgrimage to the World Bank and International Monetary Fund this week.

The Fund’s executive directors “commended the authorities’ prudent policies which have delivered strong macroeconomic outcomes and set the stage for favorable economic prospects for the near term.”

They commended the Bangko Sentral ng Pilipinas (BSP) for its “proactive” exercise of financial oversight powers, closing regulatory gaps, combating money laundering, expanding the tax base and improving collections and broadly fostering improved business climate.

“Efforts to improve tax administration and compliance, broaden the tax base, and reduce exemptions will be necessary to generate budgetary space for infrastructure and social spending. Recent increases in alcohol and tobacco excises are welcome steps in this direction,” the IMF board said in the statement.

They noted the “buoyant” financial and real estate markets as equity prices and bank credit rising while short-term T-bill rates are falling.

“The Philippine economy shrugged off weakness abroad to grow by more than 6 ½ percent while preserving internal and external stability,” they observed. “This reflected strong consumption and investment, fueled by exceptionally low interest rates and sustained remittances as well as continued export product diversification.”

Still, the Fund’s top executives said, “benefits have not permeated the broader population. Unemployment is around 6 ¾ percent – high from a regional perspective – and the poverty rate remains stubbornly elevated”.

Celia Reyes and Aubrey Tabuga of the Philippine Institute for Development Studies, writing for the East Asia Forum, explained that much of the economic growth is happening far from where the poor are – the rural farming communities that have been deteriorating. “The nature of growth must be inclusive,” they stressed, “with the poor participating and benefitting from growth.”

“The weak investment climate of poor infrastructure, limited competition due to tight restrictions on foreign investment and concentrated ownership, and continued red tape and corruption are seen as contributing factors,” the board said.

They called for further reforms to create more jobs through increased investments, improving infrastructure and enhancing governance. “Directors agreed that the expanded coverage of public health care, conditional cash transfers, and longer compulsory schooling would help meet immediate basic needs and support a more productive workforce,” they said.

The Social Weather Station (SWS) estimated that over 29 percent or about 8 million Filipinos were jobless in 2012. The government’s National Statistics Office (NSO) pegs it at about 7 percent or about 3 million relying on a different set of metrics.

To boost private investment, the Fund’s directors urged Philippine leaders to “relax limits on foreign ownership, execute public-private partnerships in a transparent manner, and strengthen the medium-term fiscal framework.”

They also warned the Philippines about the risks from “global uncertainties, volatile capital inflows, banks’ increasing exposure to some sectors, and the possibility of stretched asset prices.”

The Fund “stressed the importance of continued prudent policy implementation and stepped up reforms to bolster resilience, sustain high growth and reduce poverty.”

The IMF anticipates economic expansion to taper from 6.6 percent last year to about 6 percent this year.