IMF raises growth forecast for PHL

By means of Luisa Maria Jacinta C. Jocson, News reporter

THE INTERNATIONAL MONETARY The Fund (IMF) increased gross domestic product (GDP) growth. forecast for the Philippines for this year and 2025.

In its latest World Economic Outlook (WEO), the IMF upgraded its Philippine growth forecast to 6.2% this year from 6% previously. This falls within the government’s revised growth target of 6-7%.

“2024 real GDP growth was slightly revised to 6.2% from WEO’s January forecast of 6%,Fbuilding on a better-than-expected outcome in the last quarter of 2023,” Ragnar Gudmundsson, IMF representative for the Philippines, said in an email.

The Philippine economy grew 5.5% in both the fourth quarter and full year 2023.

Based on IMF projections for emerging and developing Asia, the Philippines is expected to post the second fastest GDP growth this year, just behind India (6.8%). It is ahead of Vietnam (5.8%), Indonesia (5%), China (4.6%), Malaysia (4.4%) and Thailand (2.7%).

“Growth in emerging and developing Asia is expected to decline from an estimated 5.6% in 2023 to 5.2% in 2024 and 4.9% in 2025, a slight upward revision compared to the January 2024 WEO Update” , the report said.

The multilateral lender expects five member economies of the Association of Southeast Asian Nations (ASEAN-5) to grow by an average of 4.5% this year, slightly lower than the 4.7% forecast it previously gave.

The ASEAN-5, comprising the Philippines, Singapore, Malaysia, Vietnam and Indonesia, is expected to grow 4.6% next year, slightly higher than the 4.4% projection in January.

For 2025, the IMF expects Philippine GDP to grow 6.2%, slightly higher than 2025 growth. previous forecast of 6.1%, but lower than the government’s 6.5-7.5% goal.

Mr Gudmundsson said the 2025 forecast is supported by expectations of an “acceleration of domestic demand and investment.”

Next year, the Philippines has the second fastest projected growth in the region, just behind India and Vietnam (both 6.5%).

“In the medium term, structural reforms will be needed to close infrastructure and education gaps, attract greater foreign direct investment (FDI) and reap the benefits.Fit comes from the digital economy and should help realize a (Philippine) growth potential of around 6-6.5%,” Mr Gudmundsson said.

“These reforms should be complemented by strengthening existing social protection systems and tackling climate change through a more integrated strategy that includes carbon pricing,” he added.

Economic managers are targeting growth of 6.5 to 8% between 2026 and 2028.

Meanwhile, the IMF expects global growth to stabilize at 3.2% for both 2024 and 2025. The IMF increased its forecast for 2024 by 0.1 percentage point, but left its projection for 2025 unchanged from January.

“Nevertheless, the projection for global growth in 2024 and 2025 is below the historical (2000-2019) annual average of 3.8%, due to restrictive monetary policy and economic contraction. Ffinancial support, as well as low underlying productivity growth,” the IMF said.

It states that emerging markets and developing economies are expected to “experience stable growth through 2024 and 2025, with regional diFreferences.”

INFLATION
Meanwhile, the IMF is watchingFThis year, average growth is 3.6%, lower than the 3.7% predicted in the January update.

“InFThe economy is expected to gradually approach the 3% target in the second half of 2024, although risks remain tilted to the upside as a sharp rise in food or fuel prices could lead to greater pressure for higher wage increases and persistence in the core sector.Flation,” said Mr Gudmundsson.

InFInflation accelerated for the second month in a row in March to 3.7%, mainly due to high food and transport costs. The BSP is watchingFthis year an average of 3.8%.

BSP Governor Eli M. Remolona Jr. has said there are upside risks to the economyFThe situation has deteriorated, causing the central bank to become “slightly more aggressive than before.”

According to the BSP, inflation could temporarily accelerate above the 2-4% target in the next two quarters.

The IMF also recognizes thisFan average of 3% in 2025, the same as the previous estimate.

The BSP expects inFnext year an average of 3.2%.

Mr. Gudmundsson said the BSP was “a suffpursued a restrictive monetary policy policy until 2010FThe result completely returns to the target.”

“There could be scope for a gradual cut in policy rates later this year, provided inflation expectations are also Fwell-entrenched and upside risks in theFThe prospects for the future are not coming true,” he added.

At its last meeting in April, the Philippine central bank left its benchmark interest rate unchanged for the fourth time in a row at a nearly 17-year high of 6.5%.

From May 2022 to October 2023, the Monetary Board increased borrowing costs by 450 basis points (bps).

Mr. Remolona told Bloomberg on Monday that if he gets inFIf the situation continues to deteriorate, there is a chance that there will be no interest rate cuts this year.

The central bank is likely to start easing policy by the fall Ffirst quarter of 2025, he added.