News Column

IMF Reduces Growth Outlook

April 13, 2011

Lailany P. Gomez

economy

The International Monetary Fund (IMF) revised downward its growth projection for emerging economies this year amid rising inflation.

In its latest World Economic Outlook, the IMF said economic growth in the Association of Southeast Asian Nations 5 -- composed of the Philippines, Vietnam, Indonesia, Malaysia and Thailand -- will slow down to 5.4 percent this year from an earlier projection of 5.5 percent. The multilateral lender maintained its growth outlook for 2012 at 5.7 percent.

Growth projections for the Philippines were left unchanged at 5 percent for this year and in 2012.

The Washington-based lender said the rising inflation in the region will be a threat to growth.

"At the same time, limited progress has been made on external rebalancing in emerging Asia. Signs of overheating are starting to materialize in a number of economies," the IMF said.

However, broad-based recovery will continue in most Asian economies, supported by strong export performance, buoyant private domestic demand and, in some cases, rapid credit growth.

The continued high growth has meant that some economies in the region have to operate at or above potential, the IMF said.

The multilateral lender said most of the increase in headline inflation in recent months has been due to a spike in a number of economies.

"Furthermore, real estate prices have been rising at double-digit rates in a number of economies. Concerns that inflation pressures may induce authorities to tighten the policy stance more rapidly than previously planned may have contributed to recent declines in equity and bond markets," the IMF said.

The lender said this uptick in price movements has caused it to revised upwards its inflation forecast for Manila to 4.9 percent this year from an earlier projection of 3.9 percent.

"The uptick in consumer price inflation in emerging economies in 2010 was attributable partly to rising food prices. But the recent bout of high food price inflation has been quite persistent, straining the budgets of low-income households and beginning to feed into overall price inflation in a number of economies," the IMF said.



Source: Copyright (c) 2011, The Manila Times, Philippines


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