IMF bullish on Philippines, other emerging markets

MANILA, Philippines - The International Monetary Fund expects emerging markets like the Philippines to withstand the adverse effects of the lingering weakness of the global economy that is being driven by the crisis in Europe and the sluggish growth of the United States.

In the latest issue of its World Economic Outlook, the IMF said most emerging markets have become resilient to external shocks because of prudent policies implemented over the past decade.

It said these policies have strengthened the domestic economies of emerging markets and made them less vulnerable to unfavorable developments in advanced economies.

The IMF was referring partly to measures intended to cut government budget deficits and, in turn, slash the percentage share of their debts to the size of their economies.

It was also pointing to measures implemented by central banks that aided in the accumulation of foreign exchange reserves and the stability of the banking sector.

"The recent decade has really been exceptional-for the first time, emerging market and developing economies have performed better than advanced economies as measures by time spent in expansion," the IMF said in the report.

Emerging economies have benefited from their "improved policy frameworks and the ample policy space-room to manoeuvre without undermining sustainability-these improvements have created," the IMF added.

In the case of the Philippines, the percentage share of the government's debts to gross domestic product has declined consistently from about 74 per cent in 2004 to just 50.5 per cent in 2011.

The decline in the debt-to-GDP ratio was attributed largely to measures aimed at shoring up tax collections.

The country's gross international reserves have likewise risen over the years to an all-time high of about $80 billion.

The rise in the foreign exchange reserves of the Philippines was driven by strong inflows of remittances, foreign investments in the business process outsourcing sector and foreign portfolio investments.

In the first semester, the Philippine economy grew 6.1 per cent even as advanced economies remained weak. The growth in the first six months made the government's official target of 5 to 6 per cent for the full year attainable.

Meantime, the outlook for the United States and the eurozone, which serve as key export markets, remains uncertain. The US economy continues to suffer from high unemployment and lackluster growth while many European countries are facing a prolonged fiscal and banking crises.

The IMF said the Philippines and other emerging economies were expected to remain generally healthy despite the ongoing economic problems in the West. However, the IMF also said that adjustments of government policies might be needed from time to time to ensure these remained appropriate to address the impact of a potential deterioration of conditions in the West.