Business Cost NewsGovernance NewsPart 4 News: General Business Environment

Higher growth possible — IMF

This is an article repost.

HIGHER economic growth can be achieved if the business climate improves and government tax efforts are intensified, the International Monetary Fund (IMF) yesterday said.

“If there is a decisive expansion in public investment and private investment, growth will go up,” IMF Asia Pacific Department Assistant Director Vivek Arora told reporters.

“There are still concerns on governance and business climate resulting in high cost of doing business. If the government can do something about it, then private investments could go up,” Mr. Arora added.

The IMF, which currently has a 2011 growth outlook of 5% for the Philippines — lower than the government’s 7-8% target, noted that the country’s prospects remained favorable, although monetary policy may have to be tightened further to manage expected capital flows.

“With abundant liquidity and the strong recovery (of emerging markets), it may be necessary to continue normalizing the policy stance,” Mr. Arora said, pointing out that Bangko Sentral ng Pilipinas (BSP) has “appropriately started to normalize monetary policy.”

He downplayed the impact of foreign portfolio investments inflows — also known as “hot money” given the ease with which these can be put in and out of an economy — as most are “slowly becoming structural in nature.”
Despite the risks, “we still see inflation being within the (central bank’s 3-5%) target in the next two years,” he said.

The BSP’s policymaking Monetary Board, which has so far delivered 25-basis point rate increases in March and May, and a one percentage point increase in banks’ reserve requirement to 20% last month, will next meet on July 28.

Mr. Arora noted that gross domestic product (GDP) growth “appears to have eased in the first half” due to lower export growth traced to supply disruptions from the Japan earthquake as well as “a temporary dip” in public spending, but will likely “pick up again” in the second half.
GDP growth slowed to 4.9% in the first quarter, from 8.4% a year earlier, due to slower merchandise exports receipts and government underspending.

To achieve higher growth, Mr. Arora said the government would have to increase its revenues. “Tax administration is okay, but where will the income come from if the increase from this is not enough to fund the administration’s projects?” he asked.

Mr. Arora suggested a“comprehensive revenue mobilization strategy” that would include strengthening tax compliance and administration as well as measures to reform excise tax, rationalize fiscal tax incentives, and address value-added tax exemptions.

“The revenue from these efforts can be funneled into infrastructure projects and social development projects such as in education and health,” the IMF official said.
==============================================================================
Source: Business World, July 20, 2011
To view the original article, click here.

Comment here