The International Monetary Fund yesterday slightly upgraded its forecast for Philippine economic growth to 6.7 per cent this year from 6.6 per cent, due in part to higher state spending and strong private construction activity.
The Philippine government expects growth of 7 to 8 per cent this year, after 6.1 per cent expansion in 2014.
Inflation is expected to stay at the lower end of the central bank's 2-4 per cent target range this year, the IMF said after the end of a staff mission to the Philippines.
"The fiscal stance should provide a stimulus as budget execution picks up in 2015-16 towards the 2 per cent of GDP deficit target, while monetary and macro-prudential policies continue to anchor inflation and financial stability," the fund said in a statement.
The IMF said risks to the outlook come from disruptive asset price shifts in financial markets due to divergent monetary policies in advanced economies, and possible weaker external demand if developed countries are hit by deflation and lower growth.
But it said the central bank's pre-emptive policy moves last year, which brought more moderate liquidity and credit growth, reduce financial stability risks, and its proactive approach to overseeing the financial sector, particularly real estate exposures, lends support.