The International Monetary Fund said it expects that growth in the Philippines will average 7 percent in 2010 and 5 percent in 2011.

“The near-term outlook is favorable,” The IMF said in a statement. “Inflation is expected to remain within the target range this year and next, and the balance of payments to stay in surplus.”

The Philippines will need to manage rising capital inflows to avoid asset-price inflation and economic swings, the report said. Monetary policy has helped to keep inflation low and the country’s central bank is in a position to take action to forestall liquidity and price pressures.

“The key challenge going forward is to sustain the recovery and strengthen the pace and quality of sustainable growth,” the IMF said. “The fragile global economic environment remains a key risk to the outlook.”

The IMF said fiscal consolidation will help the Philippines preserve budget room to respond to future shocks.

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