IMF says Philippines doing well, but notes “accelerated” credit growth

November 22, 2017

The Philippine continues to perform well especially with third quarter growth of 6.9 percent in its gross domestic product but the International Monetary Fund (IMF) said a surge in credit levels needs to be monitored.

"Credit growth has accelerated, and although most indicators find no evidence of credit booms so far, some indicators suggest that credit gaps could approach early warning levels in 2017–18," said the IMF executive board in a statement on October 26 released Wednesday.

The IMF had ended an  Article IV consultation with the Philippines, and considered and endorsed the staff appraisal without a meeting, the Fund said.

It said "main systemic risks to financial stability are high credit growth and concentration.""

"High credit growth, especially to the real estate and household sectors, merit continued monitoring. In addition, some conglomerates and real estate developers have leveraged significantly, while shadow-banking activities have expanded," the IMF added,

"The conglomerate structure and data gaps generates challenges to measure concentration but capital market development could help reduce bank loan concentration by diversifying the sources of funding for large conglomerates. Staff supports the authorities’ efforts to have legal access to information on conglomerates’ finances," the IMF said.

The Philippine economy's real GDP growth reached 6.9 percent in 2016 and 6.4 percent in the first half of 2017, led by robust domestic demand, a recovery in exports, and a fiscal impulse, the IMF said,

Headline and core inflation have remained near the center of the target band (3±1 percent) in 2017, reflecting stable commodity prices and a near zero output gap.

"The unemployment rate remains low at 5.5 percent. The external and fiscal positions are robust, with the current account balance near zero, gross international reserves at $81 billion (or 8.7 months of imports of goods and services), the national government deficit at 2.4 percent of GDP, and the general government net debt at 34.6 percent of GDP, " the IMF said,

The outlook for the Philippine economy is favorable despite external headwinds, with the IMF seeing  real GDP at 6.6 percent in 2017 and 6.7 percent in 2018, due to robust domestic demand. DMS