IMF raises RP growth forecast

The International Monetary Fund said the Philippines was reaping the benefit of economic reform and that its economy was likely to grow 6.7 percent in 2007, up from an earlier forecast of 6.3 percent.

It also said that the government would "comfortably" meet its target of bringing in the 2007 budget deficit within 63 billion pesos ($1.52 billion), although it noted that it was important to reverse weak tax collections.

"This has been a strong year for the Philippines," Il Houng Lee, the head of an IMF mission said.

"Based on the momentum through the year, the mission has raised its growth forecast to 6.7 percent for 2007 from 6.3 percent previously and to 6.0 percent for 2008, from 5.8 percent previously," the IMF said in a statement.

It said strong interest in the government's privatisation programme had led to an increase in revenues and helped reduce the deficit ahead of schedule although tax reform, and legislative support for such reform, was needed.

"Two important areas of reform would be to rationalise fiscal incentives and adjust the excise rate on tobacco and alcohol products and index it to inflation," the IMF said.

It said the strengthening of the peso PHP, which has gained more than 18 percent against the dollar this year, allowed an opportunity to prepay external debt and reduce foreign borrowing.

"This would reduce the economy's exposure to exchange rate risk in case of intensified risk aversion," it said.