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Wednesday, November 23, 2005
IMF lauds RP for RVAT but warns vs. threats
MANILA—The International Monetary Fund (IMF) praised the Philippines yesterday for its sweeping tax reform package, but said a spike in world oil prices and a softening of demand for exports remain as threats.
The IMF said it welcomed President Arroyo’s commitment to raise to 12 percent from 10 percent the reformed value-added tax (RVAT) by February next year.
It noted significant progress in economic reforms in Arroyo’s government, and said the challenge now is to sustain the gains.
“The first phase of the Expanded (Reformed) Value-Added Tax Law was implemented Nov. 1,” it said.
This, it said, has “lifted sentiment” in the financial markets, with the peso gaining against the US dollar in recent sessions.
Remittances
Growth in remittances from foreign-based workers had also “offset the impact of oil prices and indirect taxes on consumption.”
It said the economy was poised to grow five percent this year.
However, it said there were risks to the favorable outlook.
“These include a possible softening of the foreign demand for Philippine exports due to increased competition in the electronics sector,” it said. “A further spike in oil prices or avian flu could also take a toll on the real economy, while adverse developments in international capital markets could raise external borrowing costs.”
The RVAT law forms the centerpiece of Arroyo’s tax reform package and is aimed at shoring up funds to address the country’s huge deficit and avert a fiscal deficit or a debt default. (AFP)
(November 23, 2005 issue)
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