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MANILA - (UPDATED 1:03 p.m.) The International Monetary Fund has increased its growth forecast for the Philippines to 4.8 percent this year despite a more "fragile" global economic environment.
The so-called lender of last resort also raised its Philippine growth forecast for 2013 to 4.9 percent. The latest forecasts are higher than the earlier estimates of 4.2 percent and 4.7 percent for 2012 and 2013, respectively.
In a statement issued at the conclusion of a staff visit to the Philippines, the IMF said the government's "policy management is supporting confidence."
"The Philippine economy has sustained its solid momentum. Macroeconomic conditions remain generally sound," the Washington-based lender said.
It warned that the weak global economy however "could produce headwinds in the coming quarters."
"The key near-term challenge is to maintain macro-financial stability given the expectation for robust growth and strong capital inflows in the baseline, while building foundations for higher and more inclusive growth," it said.
The IMF however said the Philippines "has the policy space to support growth if needed."
The Bangko Sentral ng Pilipinas has been keeping rates steady at record lows of 4 and 6 percent for the overnight borrowing and lending windows since the start of the year. The central bank cited benign inflation, which averaged 3 percent in the first six months, or at the low end of the BSP's full-year target range of up to 5 percent.
Also allowing the BSP to keep its policy setting steady is the Philippines' faster-than-expected economic growth of 6.4 percent in the first quarter. Despite a weak external environment, the country's economic managers still forecast robust growth in the second quarter. They have since kept full-year growth at a target range of 5-6 percent.
The IMF said Philippine inflation will remain within official target, while the current account and balance of payments position will stay in surplus.
"Public finance continues to improve while the financial system has sustained its resiliencey notwithstanding the more challenging external markets. Although the global environment indeed remains a key downside risk to the outlook, if the momentum from the first quarter persists, growth could surprise on the upside," the lender said.
BSP Governor Amando M. Tetangco Jr. said the task of "keeping macrofinancial stablity in the face of high capital flows and robust growth can be challenging."
Given this, he said there is "need for policymakers like the BSP to consider a variety of tools from their toolkits."
"So far, our assessment is that the BSP has room in its enhanced toolkit to meet these challenges," he added.
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