The International Monetary Fund (IMF) is expecting a six percent growth of the Philippine gross domestic product (GDP) this year and 5.5 percent in 2014.
In its latest report, the IMF has noted with satisfaction some improvement in the country's business climate.
However, to sustain strong growth, increase domestic job creation, and reduce poverty, the IMF stressed the need for further reforms geared toward increasing investment, improving infrastructure, and enhancing governance.
The expanded coverage of public health care, conditional cash transfers, and longer compulsory schooling would help meet immediate basic needs and support a more productive workforce.
To catalyze private investment, The IMF has encouraged the government to relax limits on foreign ownership, execute public-private partnerships in a transparent manner, and strengthen the medium-term fiscal framework.
The IMF has commended the authorities' prudent policies which have delivered strong macroeconomic outcomes and set the stage for favorable economic prospects for the near term.
However, the IMF noted some risks associated with global uncertainties, volatile capital inflows, banks' increasing exposure to some sectors, and the possibility of stretched asset prices.
The IMF stressed the importance of continued prudent policy implementation and stepped up reforms to bolster resilience, sustain high growth, and reduce poverty.
It has welcomed the broadening of the policy toolkit to strengthen monetary control and preserve macrofinancial stability.
The IMF also noted that the government's participation in the foreign exchange market continues to be limited to smoothing excessive volatility, and urged that the exchange rate continue to move broadly in line with fundamentals.
"Careful deployment of macroprudential measures will be key to managing inflows and risks of asset price bubbles," as the IMF highlighted that arrangements to ensure adequate central bank capital will be essential to support operational independence of monetary policy.
The IMF also commended the generally proactive financial sector oversight. Further steps to close supervisory gaps, including by broadening the central bank's authority to allow supervision of conglomerate parents of banks and strengthening legal protections for supervisors would help mitigate systemic risks from real estate, shadow banking, and concentrated credit exposures.
The recent actions to address weaknesses in the regime to combat money laundering and the financing of terrorism had been noted as the IMF endorsed the government's continued focus on further strengthening the fiscal position over the medium term.
Efforts to improve tax administration and compliance, broaden the tax base, and reduce exemptions will be necessary to generate budgetary space for infrastructure and social spending. Recent increases in alcohol and tobacco excises are welcome steps in this direction, the IMF added.