MANILA — The International Monetary Fund (IMF) lowered its growth projection for ASEAN-5, which includes the Philippines, for 2012 on account of sustained drop in external demand but sees improvement for 2013.

In the Chapter 2 of IMF’s World Economic Outlook (WEO) released Tuesday, the multilateral lender cut its 2012 growth projection for the Association of South East Asian Nation -5 (ASEAN-5), which groups Indonesia, Thailand, Malaysia, Philippines and Vietnam, to 5.4 percent from 5.6 percent in the WEO released in September 2011.

IMF’s growth forecast for the group for 2013 was set at a higher level of 6.2 percent.

Relatively, growth forecast for the Philippines for this year was slashed to 4.2 percent from 4.9 percent in the previous WEO while projection for 2013 was set at 4.7 percent.

The report expects continued soft landing in China but stressed that deleverage would continue due to resilient domestic demand in the world’s second largest economy along with limited financial spillovers, the presence of room for policy easing and capacity of Asian banks to step in European banks

For the whole of Asia, the multilateral lender noted the slower activity, particularly in exports, in the region in the last three months of 2011, “reflecting both external and domestic developments.”

Primary reason for the lower exports performance was the drop in external demands, particularly from Europe and US, while on-shore factors included deterioration in business sentiment in India and historic floods in Thailand.

“In some other Asian economies, however, robust domestic demand helped offset the drag on growth of slowing exports,” the report said.

Other positive contributors include the buoyant investment and private consumption in China due to solid corporate profits and increase in household income and the stronger-than-anticipated recovery of supply-chain disruptions after the twin disaster in Japan in March of last year.

The report also noted that although Asia was affected by the financial crisis in the euro zone “the effects were limited.”

It said that “market movement in late 2011 were smaller than the gyrations observed during 2008-09.”

“The movements had limited economic impact and were partially reversed in early 2012,” it said.

And because of the fragile outlook for economies outside Asia, IMF raised the need for the region to “re-balance growth by strengthening domestic sources of demand over the coming years.”

For one, strengthening of the Chinese yuan and the progress in the implementation of the measures identified in the country’s 12th Five-Year Plan “would ensure that the recent decline in the external surplus is sustained.”

“Elsewhere in emerging Asia, including in many ASEAN economies and India, strengthening domestic demand will require improving the conditions for private investment, including by addressing infrastructure bottlenecks and enhancing governance and public services delivery,” it said. (PNA) RMA/JS/utb