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IMF hikes PHL growth outlook for this year

Buildings are seen from the Pasig River Esplanade in Lawton Manila. — EDD GUMBAN, The Philippine Star

By Keisha B. Ta-asan, Reporter

THE PHILIPPINE economy is set to expand by 6% this year amid likely stronger recovery in investments and exports, the International Monetary Fund (IMF) said on Tuesday.

In its January 2024 World Economic Outlook (WEO) update, the IMF upwardly revised its gross domestic product (GDP) growth outlook for the Philippines to 6% from the 5.9% forecast it gave in October.

However, the latest forecast is still below the government’s 6.5-7.5% GDP growth target for 2024.

“Growth in 2024 should be supported by an acceleration in public investment and improved external demand for Philippine exports, exports of services in particular,” IMF Representative to the Philippines Ragnar Gudmundsson said in an e-mail.

The multilateral lender also maintained its growth forecast for 2023 at 5.3% and for 2025 at 6.1%. Both projections are below the government’s targets of 6-7% in 2023 and 6.5-8% next year.

“GDP growth is expected to remain at around 6-6.5% over the medium term, making the Philippines one of the strongest performers in the region and globally,” Mr. Gudmundsson said.

However, he said a more abrupt global economic slowdown due to geopolitical tensions and geoeconomic fragmentation, a weaker recovery in China, or a sudden tightening in financial conditions worldwide are risks to the outlook.

“On the domestic front, steadfast implementation of structural reforms to raise productivity and successful efforts to attract more foreign investment would also contribute to raising growth prospects,” Mr. Gudmundsson said.

The IMF also hiked its 2024 growth projection for the world economy by 0.2 percentage point to 3.1% due to a stronger-than-expected economy in the United States and several large emerging economies. Global growth is also seen picking up to 3.2% in 2025.

The forecasts for 2024 and 2025 are still below the historical average of 3.8%, the IMF said, as elevated monetary policy rates and lack of fiscal support amid high debt may continue to weigh on economic activity.

The multilateral lender also hiked the 2024 forecast for the five economies in the Association of Southeast Asian Nations (ASEAN-5) to 4.7% from 4.5% in the October forecast. For next year, it trimmed the ASEAN-5 forecast by 0.1 percentage point to 4.4%.

ASEAN-5, comprised of the Philippines, Singapore, Malaysia, Vietnam, and Indonesia, is estimated to have expanded 4.2% in 2023.

The IMF noted the global economy is “surprisingly resilient” despite Russia’s invasion of Ukraine and the cost-of-living crisis is proving surprisingly resilient.

“Inflation is falling faster than expected from its 2022 peak, with a smaller-than-expected toll on employment and activity, reflecting favorable supply-side developments and tightening by central banks, which has kept inflation expectations anchored,” it added.


The IMF upwardly revised its inflation projection for the Philippines this year to 3.7% from 3.2% previously, as global food prices may likely be higher this year.

Still, inflation is expected to be significantly lower this year compared to the 6% average in 2023.

“Inflation is projected to gradually approach the midpoint of the central bank’s 2-4% target range in the second half of 2024 and to average 3% in 2025,” Mr. Gudmundsson said.

The Bangko Sentral ng Pilipinas (BSP) sees headline inflation averaging 3.7% this year, before easing to 3.2% in 2025.

However, should risks materialize, the BSP’s risk-adjusted forecasts show that inflation could settle above the 2-4% target, or at 4.2%, this year before reverting back at 3.4% in 2025.

“The central bank is expected to stay on hold over the coming months to allow inflation expectations to settle more firmly within the target range, which in turn could lead to rate cuts,” Mr. Gudmundsson said.

“Possible rate cuts depend on inflation expectations settling firmly within the BSP’s 2-4% target range,” he added.

The central bank’s key interest rate currently stands at 6.5%, the highest in 16 years. This was after the BSP emerged as the most aggressive central bank in the region after hiking borrowing costs by 450 basis points from May 2022 to October 2023.

The BSP will hold its first policy meeting this year on Feb. 15.

Meanwhile, global headline inflation is expected to fall to 5.8% in 2024 and to 4.4% in 2025, the IMF said.

“With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced. On the upside, faster disinflation could lead to further easing of financial conditions,” it said.

But supply shocks stemming from the continued attacks in the Red Sea and other disruptions may prolong tight monetary policy settings in economies, the multilateral lender said.

“Policy makers’ near-term challenge is to successfully manage the final descent of inflation to target, calibrating monetary policy in response to underlying inflation dynamics and — where wage and price pressures are clearly dissipating — adjusting to a less restrictive stance,” the IMF added.

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