The Philippines to Become Fastest Growing Economy | IMF

Summary

The IMF predicts the Philippines to be Southeast Asia's fastest-growing economy, with a 6% growth in 2024 and 6.2% in 2025, following India. This growth is attributed to strong consumption demand, increased public and private investments, and export recovery. President Bongbong Marcos's leadership, including foreign investments and infrastructure projects, is highlighted. The IMF also notes the BSP's effective inflation control and the government's pro-growth fiscal stance, focusing on capital spending and gradual revenue increase. However, tariff reductions on rice imports face opposition, fearing local agriculture's impact.

Takeaways

• 📈 The IMF predicts the Philippines to be the fastest-growing economy in Southeast Asia, with a projected growth of over 6% in 2024 and 6.2% in 2025.
• 🌏 The Philippines' growth rate is second only to India in the Asian continent, highlighting its significant economic progress.
• 📊 Growth is driven by strong consumption demand, increased public and private investments, and a recovery in exports, indicating a robust and diverse economic foundation.
• 💼 President Bongbong Marcos is credited with attracting foreign investments and continuing infrastructure projects, contributing to economic growth.
• 🏦 The Philippine central bank (BSP) has effectively managed inflation by maintaining a policy rate of 6.5%, aiming for a 3% inflation rate by the second half of 2024.
• 📉 The government's reduction of rice import tariffs from 35% to 15% is intended to mitigate food price increases and support vulnerable households.
• 🚜 Despite the benefits, the reduction in tariffs has faced opposition from local farmers who fear increased competition from cheaper imported rice.
• 🌱 The government is focusing on reforms to attract foreign investment and create a business-friendly environment to diversify the economy.
• 💼 The Medium-Term Fiscal Program emphasizes pro-growth fiscal policies, with increased capital spending and a gradual increase in revenues.
• 🏗️ Higher capital spending by the government on infrastructure and public facilities aims to stimulate economic growth and improve long-term development.

Q & A

What does the IMF predict for the Philippines' economic growth in 2024 and 2025?

The IMF predicts that the Philippines' economic growth will reach over 6 percent in 2024 and a further 6.2 percent increase by 2025.

How does the Philippines' expected economic growth rate compare to other Asian countries like India, Vietnam, Indonesia, and Malaysia?

The Philippines is expected to have the fastest economic growth in the Southeast Asian region and the second fastest in Asia, just behind India's projected growth rates of 7 percent in 2024 and 6.5 percent in 2025. Vietnam is expected to grow at 5.8 percent in 2024, Indonesia at 5 percent, and Malaysia at 4.4 percent.

What factors are driving the Philippine economy's growth according to the IMF?

The growth is driven by stronger consumption demand, increased public and private investment, and a recovery in exports.

What does strong consumption demand indicate about the Filipino consumers?

Strong consumption demand indicates that Filipino consumers are confident and willing to spend more, reflecting rising incomes and improved living standards.

How does an increase in public and private investment impact the Philippine economy?

An increase in public and private investment leads to the creation of jobs, boosts productivity, and lays the foundation for long-term economic growth by improving infrastructure and logistics.

What does the recovery in exports suggest about the Philippines' position in international markets?

The recovery in exports suggests that the Philippines is gaining a stronger foothold in international markets, benefiting from global trade, and bringing in foreign exchange.

How has the BSP addressed inflationary pressures according to the IMF?

The BSP has addressed inflationary pressures by holding the policy rate at 6.5 percent, which has helped inflation to decline and is expected to go towards 3 percent in the second half of 2024.

What is the significance of the reduction in tariffs on rice imports from 35 to 15 percent?

The reduction in tariffs on rice imports makes rice imports cheaper, potentially leading to lower prices for consumers, which is significant for the Philippines where rice is a staple food.

What are the potential drawbacks of reducing tariffs on imported rice as per the opposition's concerns?

Reducing tariffs could lead to increased competition from cheaper imported rice, which might hurt local farmers who are unable to compete with the lower prices, potentially leading to decreased income and a decline in domestic agricultural production.

How does the IMF view the recent reforms to attract foreign investment and create a business-friendly environment in the Philippines?

The IMF views these reforms as important for the Philippine economy as they diversify the economy and develop the country’s growth potential.

What is the Philippine government's approach to fiscal policy as per the IMF's report?

The government is shifting its fiscal policy towards fostering economic growth by increasing investment in infrastructure and other capital projects, with a more gradual increase in revenues over the medium term.

What is the target for reducing the fiscal deficit as outlined in the Philippines' Medium-Term Fiscal Program?

The target is to reduce the fiscal deficit from 6.2 percent of GDP in 2023 to 3.7 percent of GDP by 2028.

Outlines

00:00

🌟 Philippines' Economic Boom

The IMF predicts the Philippines to be the fastest-growing economy in Southeast Asia, with a projected growth of over 6% in 2024 and 6.2% in 2025. This growth is attributed to strong consumption demand, increased public and private investments, and a recovery in exports. The country's central bank, BSP, has effectively managed inflation by maintaining a policy rate of 6.5%, aiming for a 3% inflation rate by the end of 2024. Additionally, the government's reduction of rice import tariffs from 35% to 15% is expected to lower consumer prices and alleviate financial pressures on households, despite opposition from local farmers who fear increased competition from cheaper imports.

05:02

🌐 Boosting Foreign Investments and Fiscal Reforms

The Philippine government's recent reforms have successfully attracted foreign investments, with FDI reaching over $8.86 billion in 2023. Despite a decrease from 2022, this figure is significantly higher than pre-reform levels. The government is also focusing on creating a business-friendly environment to diversify the economy and enhance growth potential. The IMF highlighted the Philippines' Medium-Term Fiscal Program, which emphasizes pro-growth fiscal policies, including higher capital spending and a gradual increase in revenues. The government aims to reduce the fiscal deficit from 6.2% of GDP in 2023 to 3.7% of GDP by 2028, indicating a strategic approach to balancing economic growth with fiscal responsibility.

Keywords

💡International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an international organization that aims to foster global monetary cooperation, secure financial stability, facilitate international trade, and reduce poverty around the world. In the context of the video, the IMF plays a crucial role as it provides economic forecasts and insights into the growth of the Philippines, highlighting its potential to become the fastest-growing economy in Southeast Asia.

💡Economic Growth

Economic growth refers to the increase in the production of goods and services by an economy over a period of time, often measured by the percentage increase in Gross Domestic Product (GDP). The video discusses the IMF's projection of the Philippines' economic growth reaching over 6 percent in 2024 and 6.2 percent in 2025, positioning it as a leading economy in the region.

💡Southeast Asian Region

The Southeast Asian region comprises a group of countries in the southeastern part of Asia, including countries like Vietnam, Indonesia, and the Philippines. The video emphasizes the Philippines' economic growth in comparison to its Southeast Asian neighbors, showcasing its potential to lead in terms of economic expansion.

💡Consumption Demand

Consumption demand refers to the desire and ability of consumers to purchase goods and services. In the video, strong consumption demand is highlighted as a driver of the Philippine economy, indicating that Filipino consumers are confident and willing to spend more, which in turn fuels economic growth.

💡Public and Private Investment

Public and private investment involves capital injections into the economy by both the government and private sector for infrastructure, business expansion, and other projects. The video mentions that increased public and private investment in the Philippines is contributing to job creation, productivity enhancement, and long-term economic growth.

💡Exports

Exports are goods and services produced domestically but sold to other countries. The video discusses the recovery in Philippine exports as a sign of the country gaining a stronger foothold in international markets, which is beneficial for economic health by bringing in foreign exchange and supporting domestic industries.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. The IMF's report on the Philippines notes that the country's central bank has addressed inflationary pressures effectively, which is a positive sign for economic stability.

💡Tariffs

Tariffs are taxes imposed on imported goods and services. The video discusses the reduction of tariffs on rice imports from 35 to 15 percent in the Philippines, which is intended to make rice cheaper for consumers but has also faced opposition due to concerns over local agriculture protection.

💡Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) refers to an investment made by a firm or an individual from one country into business interests located in another country. The video highlights the increase in FDI in the Philippines, which is a sign of the country's attractiveness to foreign investors and a key factor in its economic growth.

💡Fiscal Policy

Fiscal policy refers to government actions that affect the economy, especially through tax and spending policies. The video mentions the Philippine government's Medium-Term Fiscal Program, focusing on higher capital spending and a gradual increase in revenues, which aims to stimulate economic growth and development.

💡Fiscal Deficit

A fiscal deficit occurs when a government's expenditures exceed its revenues. The video discusses the Philippine government's goal to reduce the fiscal deficit, which implies a more balanced approach to spending and revenue collection, contributing to the overall economic stability and growth.

Highlights

The Philippines is projected to be the fastest growing economy in Southeast Asia by the IMF.

Economic growth is expected to reach over 6 percent in 2024 and 6.2 percent in 2025.

The Philippines' growth rate is second only to India in the entire Asian continent.

Vietnam is expected to grow at 5.8 percent, Indonesia at 5 percent, and Malaysia at 4.4 percent in 2024.

IMF's reputation as a global institution lends credibility to their projections.

President Bongbong Marcos is credited with attracting major foreign investments.

Continued infrastructure projects from the previous administration are contributing to growth.

Stronger consumption demand is driving economic growth, reflecting rising incomes and living standards.

Increased public and private investment is creating jobs and boosting productivity.

Recovery in exports indicates a stronger foothold in international markets.

BSP's policy to hold the policy rate at 6.5 percent has helped control inflation.

Reduction in tariffs on rice imports from 35 to 15 percent can lower consumer prices.

Lower rice prices can alleviate financial pressure on households, especially the lower-income brackets.

Reduction in tariffs has faced opposition from local farmers fearing increased competition from imported rice.

Recent reforms aim to attract foreign investment and create a business-friendly environment.

Foreign direct investments (FDI) in the Philippines reached over $8.86 billion in 2023.

The Medium-Term Fiscal Program focuses on higher capital spending and a gradual increase in revenues.

The government aims to reduce the fiscal deficit from 6.2 percent of GDP in 2023 to 3.7 percent by 2028.

The economic growth is attributed to the Philippine government's policies and historical economic development.

Transcripts

The International Monetary Fund (IMF) has  recently said that the Philippines is set  

to become the fastest growing economy in  the entire Southeast Asian region! They  

are expecting the economic growth of the country  to reach over 6 percent this 2024, and a further  

6.2 percent increase by 2025. This is not only  the fastest in the entire Southeast Asian region,  

it is also the second fastest in the entire Asian  continent just behind India, which is expected to  

grow 7 percent in 2024 and 6..5 percent in 2025.  The latest IMF datamapper data shows that Vietnam,  

which is one of Asia’s fastest growing economies,  is only expected to grow at 5.8 percent in 2024,  

Indonesia, on the other hand, is expected to  grow at 5 percent and Malaysia at 4.4 percent.

While these are mere projections, one  should not cast doubt against the IMF.  

They are global institutions renowned by  major economies and world leaders. If the  

Philippines does indeed become the fastest  growing economy within the next two years,  

does this not signify great leadership  in the country’s government? Can we  

attribute this to no other than the President of  the Philippines Bongbong Marcos? President Marcos,  

has after all, been doing a lot for the entire  country. He has led major foreign investments  

to come to the Philippines. He has continued his  predecessor's major infrastructure projects. Even  

his cabinet and staff are already calling  him more ambitious than former President  

Rodrigo Duterte. So, is Marcos the reason  for the country’s economic growth? Well,  

let’s take a look at what the IMF has said about  the Philippine economy beyond their projections.

In June of 2024, an IMF Team hosted a meeting  in Manila. The team discussed recent economic  

and financial developments and the outlook for  the Philippine economy. The team led by Elif  

Arbatli Saxegaard said that the Philippine  economy continued to perform well despite  

external challenges and policy tightening. The  growth behind this is driven by no other than  

stronger consumption demand, increased public and  private investment, and a recovery in exports.

What does this mean? What does strong consumption  demand imply? Well, strong consumption demand  

implies that Filipino consumers are confident and  willing to spend more. This increased spending  

drives demand for goods and services, which  in turn fuels economic growth. Furthermore,  

strong consumption demand often reflects rising  incomes and improved living standards. When people  

have more disposable income, they tend to spend  more on both essential and non-essential items.

A rise in public and private investment, on the  other hand, indicates that both the government  

and private sector are injecting capital into the  economy, building infrastructure, and expanding  

businesses, which creates jobs and boosts  productivity. These projects not only create  

immediate jobs but also lay the foundation for  long-term economic growth by improving logistics,  

reducing costs, and increasing efficiency.  Private investment, on the other hand,  

includes spending by businesses on new facilities,  equipment, and technology. This kind of investment  

enhances productivity and competitiveness,  leading to sustained economic expansion.

Finally, the recovery in exports suggests that the  

Philippines is gaining a stronger  foothold in international markets,  

benefiting from global trade. This is crucial  for a country’s economic health as it brings  

in foreign exchange, helps balance trade  deficits, and supports domestic industries.

On top of this statement about consumption,  investment and exports, the IMF team also  

said that the Philippines’ central bank known  as BSP has addressed inflationary pressures  

by holding the policy rate 6.5 percent.  These have helped inflation to decline,  

and is expected to go towards 3 percent in  the second half of 2024. This showcases just  

how good the Philippines central bank is!  There are a lot of countries globally that  

are still battling inflation, yet  the Philippines have tamed it fast.

On top of the BSP, the IMF team has said that  the recent reduction in tariffs on rice imports  

from 35 to 15 percent, along with the removal  of non-tariff barriers in agricultural imports,  

can help mitigate food price increases  and their impact on vulnerable households.

What this essentially means is that rice imports  will now become cheaper. That is because tariffs  

are essentially taxes imposed on imported goods.  By reducing tariffs from 35 to 15 percent, the  

cost of importing rice decreases, which can lead  to lower prices for consumers. This reduction is  

particularly significant for the Philippines,  where rice is a staple food for the majority  

of the population. Lower rice prices can  alleviate financial pressure on households,  

especially those in lower-income brackets who  spend a larger portion of their income on food.

Unfortunately, the reduction in tariffs in  rice has been met with opposition. In July of  

this year, a Farmers group requested the Supreme  Court to halt the executive order that mandates  

a 15 percent reduced tariff on imported rice. A  former agriculture secretary known as Leonardo  

Montemayor also criticized the executive order,  noting that the Philippines must protect and  

stand with their rice farmers, corn growers, hog  producers, and poultry raisers. The Philippines  

must defend and support local agriculture.  Why did he say this? That is because tariffs 

are not only a source of revenue for the  government but also a tool to protect local  

industries from foreign competition. High tariffs  on imported goods make them more expensive,  

thus encouraging consumers to buy domestically  produced alternatives. By reducing tariffs,  

the government is essentially lowering the  protective barrier around local agriculture,  

which could lead to increased competition from  cheaper imported rice. This competition might  

hurt local farmers who are unable to compete with  the lower prices of imported rice, potentially  

leading to decreased income for these farmers and  a decline in domestic agricultural production.

Another key part of the IMF article is about the  recent reforms to attract foreign investment,  

and the government’s reforms to create  a business-friendly environment. These  

will diversify the economy and develop the  country’s growth potential. These have indeed  

been important for the Philippine economy.  Just take a look at the recent increase in  

the country’s foreign investments. In 2023,  the foreign direct investments (FDI) in the  

Philippines reached over $8.86 billion US  dollars. Although it was a decrease from  

the previous year of 2022, it is still a figure  much higher seen prior to the implemented reforms. 

Finally, the last part of what we are going to  discuss about the IMF’s article on the Philippines  

is when they talked about the Philippines latest  Medium-Term Fiscal Program, which they said  

represents a more pro-growth fiscal stance focused  on higher capital spending and a more gradual  

increase in revenues over the medium term. What  this means is that the Philippine government is  

shifting its fiscal policy towards fostering  economic growth by increasing its investment  

in infrastructure and other capital projects.  This approach aims to stimulate the economy by  

creating jobs, improving productivity, and laying  the foundation for long-term development. Rather  

than implementing rapid revenue increases, the  government plans a gradual rise in revenues,  

allowing businesses and consumers time to adjust  and continue contributing to economic activity.

Let’s talk about this one at a time. Higher  capital spending simply means increased  

investment by the government in infrastructure  projects and other capital assets. This can  

include building new roads, bridges, schools,  hospitals, and other public facilities.

The target to increase revenue  gradually, on the other hand,  

hails from the implementation of policies  to boost tax collection and broaden the tax  

base without causing sudden financial  strain on businesses and individuals.

Thirdly, the government also aims to reduce the  fiscal deficit from 6.2 percent of GDP in 2023 to  

3.7 percent of GDP by 2028. A fiscal deficit  means that the government is spending more  

than it earns in revenue. Put it simply, they are  investing more into projects like infrastructures,  

and not collecting enough money from  say taxes. To pay for the deficit,  

they must either borrow money or  find ways to increase their revenue.

So, as we conclude, is the economic growth  of the Philippines because of the current  

presidency of Bongbong Marcos? Well, it  looks like the IMF says so as well! They  

have cited so many factors about the Philippine  government. They talked about their fiscal plans,  

which are directly from the government. They  have discussed how the reduction in tariffs  

will help the Philippines, which comes from  an executive order. They even cited foreign  

investments and the easing of doing business as  a key part. Although, we should not just point  

to the current Philippine government for this.  The economic growth of the Philippines is not  

built by one government, it was built by its  history, from the very first president to the  

current one. But because the Philippines is now  expected to become the fastest growing economy  

in the entire Southeast Asian region, and the  second fastest in the entire Asian continent,  

it can be safe to say that the Philippine  economic growth is indeed being driven by  

the Philippine government. But anyway, do let  us know what you think. Thanks for watching!