IMF chief lauds Philippine growth as FDI, hot money inflow decreases

2012-11-17 09:05:19 GMT2012-11-17 17:05:19(Beijing Time)  Xinhua English

by Alito Malinao

MANILA, Nov. 17 (Xinhua) -- Managing Director Christine Lagarde of the International Monetary Fund (IMF) has said that the Philippines is the only country in the world where the IMF has upgraded its growth forecast for this year.

In a press briefing Friday in Malacanang, the Philippine presidential office, Lagarde reiterated IMF's earlier revised growth forecast of 5 percent for the country in 2012.

Other multilateral financial institutions such as the World Bank and the Manila-based Asian Development Bank (ADB) have also adjusted upwards their forecast for the Philippines.

"I congratulate the Filipino authorities for their excellent economic stewardship during difficult times. In the last decade, the Philippines managed to have an average growth of about 5 percent," Lagarde said.

She earlier met with Philippine Finance Secretary Cesar Purisima, Budget Secretary Florencio Abad and deputy central bank (BSP) governor Diwa Guinigundo.

According to Lagarde, emerging Asian economies like the Philippines play a significant role in driving growth of the global economy at this difficult time when industrialized countries are confronted with economic crisis.

Lagarde is the second leader who made an optimistic projection about the Philippines' economic future. Last week, visiting Canadian Prime Minister Stephen Harper made the bullish prediction to President Benigno Aquino that the Philippines could be the next "Asian tiger".

The Australian business community also told Aquino during his state visit there last month that the Philippines is now "the fastest-growing economy in Asia."

The Aquino administration has set a growth target of between 5 and 6 percent this year, 6 and 7 percent in 2013, and at least 7 percent in the succeeding years.

The target seems to be achievable considering that in the first half of this year the Philippine economy grew by an unexpected 6.1 percent while inflation averaged only 3.2 percent in the first 10 months, well within the 3-5 percent target for the year.

But some recent economic indicators could dampen the rosy picture of the Philippines as painted by Lagarde and Harper.

Data released by the BSP showed that the net inflow of foreign direct investment (FDI) in the country fell to only 13 million U.S. dollars in August, down by nearly 83 percent from 76 million U.S. dollars in the same month last year. The amount was also 88 percent lower than the 108 million U.S. dollars in July.

The BSP said that the drop in the net FDI inflow "reflects investors relatively cautious stance due to weak global economic prospects and financial strains in the advanced economies."

On Wednesday, the BSP also said that the net inflow of foreign portfolio investment or "hot money" to the Philippines shrunk in October which was due mainly to profit-taking by equity investors.

The BSP said that the net inflow of "hot money" in October amounted to only 40 million dollars, down by about 83 percent from 237 million dollars in the same month last year.

According to the BSP, investor appetite for peso-denominated portfolio assets remained strong in October, noting a significant foreign buying of Philippine stocks and bonds during the period.

However, the net inflow of foreign portfolio investment dropped because the increase in the gross inflows was offset by the spike in outflows due to profit-taking, the BSP said.

"The net inflow was much lower as profit-taking triggered heavy sell-offs of publicly listed securities," BSP said.

But the BSP is still confident that foreign investment would increase soon, especially once the country gets an investment grade from any of the three major international credit rating agencies.

Despite continued optimism on the country's economic growth, Lagarde has called on the Philippine government to translate economic gains into programs that could alleviate poverty.

"It is no secret that about 42 percent of the Philippine population is living on less than 2 U.S dollars a day," Lagarde said.

She then advised the Aquino government to continue with, if not strengthen, programs aimed at addressing inequality, citing the conditional cash transfer (CCT) program, which grants monthly subsidies to selected poorest families.

Economic analysts have agreed that growth in the country benefits only the rich and the middle class but not the poor.

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