IMF revises up Philippines 2020 growth forecast to 6.3%

The International Monetary Fund (IMF) headquarters building is seen ahead of the IMF/World Bank spring meetings in Washington, U.S., April 8, 2019. REUTERS/Yuri Gripas

MANILA, Nov 18 (Reuters) - The Philippine economy was likely to grow faster than previously thought next year, the International Monetary Fund said on Monday, adding that the government had room to strengthen expansionary policies if any risks to growth emerged.

The Philippines' economic growth rate is seen accelerating to 6.3% in 2020, the IMF said, faster that its 6.2% forecast in October and picking up from its of 5.7% projected growth this year.

"The medium-term economic outlook remains favourable, especially if the strong structural reform momentum continues", the IMF said in a statement issued following its regular "Article 4" review of the Philippine economy.

Inflation this year is projected at 1.6%, before edging up to 3.0% next year, the IMF said. Both estimates, which were lower than previous forecasts, are well-inside the central bank's 2%-4% target for this year and next.

A pick up in government spending, which had been delayed by the approval of the 2019 budget, lifted economic growth to 6.2% in July-September, accelerating from 5.5% in the previous quarter.

On Monday, Philippine lawmakers passed on third reading a bill extending the life of the 2019 budget up to end of next year to make up for the delay and allow the government to fund priority projects.

The Philippines remains one of the fastest-growing economies in Asia, but risks stemming from ongoing U.S.-Sino trade tensions and policy uncertainty could cloud the country's growth outlook, the IMF said.

"The Philippines has space for an expansionary policy response should downside risks materialise," IMF said.

Economists expect the Philippine central bank to resume easing monetary policy next year after three interest rate cuts this year to buffer the economy against global headwinds.

Cooling inflation has allowed the central bank to cut interest rates by a total of 75 basis points (bps) this year, reversing some of last year's rates hikes which totalled 175 bps.

The central bank also reduced the amount of cash that banks must hold as reserves by 300 basis points, with another cut of 100 bps to take effect in December, bringing the ratio to 14%. (Reporting by Karen Lema; editing by Simon Cameron-Moore)