IMF cuts Philippine growth outlook

IMF cuts Philippine growth outlook
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A MAN sells Philippine flags to motorists along EDSA in Quezon City, June 10, 2024. — PHILIPPINE STAR/MIGUEL DE GUZMAN

By Luisa Maria Jacinta C. Jocson, Reporter


THE INTERNATIONAL Monetary Fund (IMF) trimmed the Philippines’ growth outlook for this year, after a slower-than-expected first-quarter expansion.

The IMF now sees Philippine gross domestic product (GDP) expanding by 6% this year, lower than its 6.2% forecast in its World Economic Outlook (WEO) in April.

Its revised forecast is still within the government’s 6-7% target this year.


“Growth is expected to rebound to 6% in 2024 and 6.2% in 2025, on the back of stronger consumption demand, higher public and private investment and a recovery in exports,” IMF Mission Chief Elif Arbatli Saxegaard said at a press briefing on Monday.


She said the growth forecast was lowered after weaker-than-expected GDP data.

“The 2023 (GDP growth) was revised down slightly from 5.6% to 5.5%… We got new data on the first quarter, which was slightly lower than what we had expected. So, it’s reflecting a small downward adjustment, reflecting the outturn since the April WEO,” she said.

The economy grew by 5.7% in the first quarter from 6.4% a year ago and 5.5% in the fourth quarter.

Despite the lower forecast, Ms. Saxegaard said the Philippine economy “continues to perform well despite external challenges and policy tightening.”

She said growth would be driven by the government’s initiatives to improve ease of doing business and attract foreign direct investments, which could “raise the economy’s long-term growth potential.”

However, she said downside risks to the outlook include geoeconomic fragmentation, elevated interest rates and climate-related shocks.

The IMF retained its 6.2% GDP growth forecast for 2025, which will be mainly driven by easing inflation and a pickup in household consumption and investments.

Meanwhile, the IMF said it sees Philippine inflation settling at 3.4% this year, lower than its earlier forecast of 3.6%.

This is also below the Bangko Sentral ng Pilipinas’ (BSP) full-year inflation expectation of 3.5%.

“That reflects our view that in the second half, food price inflation will come down faster due to the recently announced lower import tariffs on rice,” Ms. Saxegaard said.


Last week, the National Economic and Development Authority Board approved a reduction in rice import tariffs to 15% from 35%. This is part of a medium-term plan to lower tariffs on agricultural and industrial products until 2028.

The tariff cut could bring down the retail price of rice by P6 to P7 per kilo as early as July, according to the Agriculture department.

“While higher prices of food have recently led to an uptick, inflation is projected to decline towards the target of 3% in the second half of the year,” Ms. Saxegaard said.

However, IMF said that risks to the inflation outlook remain on the upside due to geopolitical tensions and commodity price volatilities.

Ms. Saxegaard said the BSP should maintain a “sufficiently restrictive” policy stance to tame inflation.

Once inflation settles firmly within the 2-4% target, this would be the appropriate time for the central bank to begin easing, she added.

“That opens up space for the BSP to slightly loosen or gradually reduce its policy rates (and) would still maintain its policy stance restrictive enough to anchor inflation expectations,” she said.

“We would expect, even if the BSP reduced its policy rate over the medium term, real interest rates would continue to remain sufficiently tight to impact inflation,” she added.


Ms. Saxegaard said the IMF expects the central bank to ease monetary policy in “the near and over the medium term.”

The BSP can possibly start its easing cycle in August, Governor Eli M. Remolona, Jr. earlier said.

The Monetary Board kept its benchmark rate steady at a 17-year high of 6.5% for a fifth straight meeting in May.

From May 2022 to October 2023, the central bank raised borrowing costs by 450 basis points.

The IMF is preparing for its Article IV Consultation, which is set at end-September.

Under the IMF’s Articles of Agreement, the Fund holds annual bilateral discussions with its members. Representatives from the IMF will visit the country to assess economic and financial developments and hold meetings with government and central bank officials.

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