The International Monetary Fund said it supported plans by Philippines’ President Rodrigo Duterte’s administration to boost spending and widen the budget deficit as it forecast faster economic growth in the Southeast Asian economy.
Raising the fiscal gap to 3 percent of gross domestic product starting in 2017 would allow for higher infrastructure and social spending “while ensuring fiscal sustainability,” the Washington-based lender said in a statement on its website. Economic growth is forecast to quicken to 6.7 percent in 2017 from an estimate of 6.4 percent this year, it said.
Duterte’s government is asking lawmakers to approve a record budget for 2017, pledging higher spending on police, education and roads. While the Philippines is among the fastest-growing economies in the world this year, investors are starting to worry about Duterte’s anti-drug war that’s left thousands of people dead since he took office in June, and his outbursts against the U.S. and the United Nations.
The peso slumped to a seven-year low on Tuesday and global funds have sold Philippine stocks for a 23rd straight day. S&P Global Ratings has warned that the Philippines’ sovereign credit rating may be under downward pressure if Duterte’s commitment to reforms stall.
The IMF said the new administration has the “opportunity to put the economy on a higher and more equitable growth path.” Authorities are also “well equipped to respond as needed with suitable policies should any risks materialize, particularly given the strong fundamentals and ample policy space,” it said. /Bloomberg/