IMF still sees PH as one of region’s strongest economies this year

The International Monetary Fund (IMF) expects the Philippine economy to remain one of the strongest performers in the region this year, despite its outlook of slower global economic growth

In its latest World Economic Outlook (WEO), the IMF expects the Philippines’ gross domestic product (GDP) to grow by 5.3% this year, below the 6-7% target of the government. This is also slower than the 7.6% GDP expansion in 2022.

The multilateral lender’s 2023 growth outlook for the Philippines is the second fastest among emerging and developing Asia, just behind India (6.3%).

It is ahead of China and Indonesia (both at 5%), Vietnam (4.7%), Malaysia (4%), and Thailand (2.7%).

Emerging and developing Asia’s growth is expected to average 5.2% this year from 5.3% previously. The region’s growth is seen to slow to 4.8% in 2024 from 5% previously.

The IMF said that growth prospects for emerging markets and developing economies will remain weak this year.

“Global activity bottomed out at the end of last year while inflation — both headline and underlying (core) — is gradually being brought under control,” the IMF said.

“But a full recovery toward pre-pandemic trends appears increasingly out of reach, especially in emerging markets and developing economies,” it added.

The IMF’s 5.3% forecast for the Philippines this year also makes it the fastest among five Association of Southeast Asian Nations (ASEAN) member countries.

The ASEAN-5 region is projected to grow by 4.2% this year and 4.5% next year.

Based on the WEO, the IMF projects 5.9% GDP growth for the Philippines in 2024, although this was already revised to 6% last week after the conclusion of the Article IV consultation mission to Manila.

This would still make the Philippines the second-fastest growing economy in emerging and developing Asia, after India (6.3%). The Philippines is also seen to be the fastest in ASEAN-5 next year, followed by Indonesia (5%) and Malaysia (4.3%).

IMF Representative to the Philippines Ragnar Gudmundsson said the multilateral lender’s latest projections for the Philippines were finalized during the Article IV mission, as the forecasts in the WEO update were done before the consultations.

“Our views on monetary policy are still in line with those shared last week,” he said in an e-mail. “Essentially, we made small adjustments to our projections based on our discussions and the latest data we received in the context of the mission.”

IMF Mission Chief to the Philippines Shanaka Jayanath Peiris earlier said the main downside risk to the IMF’s growth outlook for the Philippines is persistent inflation, which could prompt the central bank to resume monetary tightening.

The IMF expects Philippine inflation to rise to about 6% this year before declining to 3.5% in 2024. The BSP sees inflation averaging 5.8% this year and 3.5% in 2024.

The BSP has kept the key interest rate at a near 16-year high of 6.25% since March.

Mr. Peiris had said that a “higher-for-longer” policy rate path may be necessary until inflation falls within the target range. 

The IMF projects Philippine inflation to return to the 2-4% target by the first quarter of next year.

Meanwhile, the IMF expects global growth to slow to 3% this year, as the global economy continues to recover “slowly” from the pandemic, Russia’s invasion of Ukraine and the cost-of-living crisis. It also trimmed its 2024 outlook to 2.9%, from 3% previously.

“Yet growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting,” the IMF said.

The IMF expects global inflation to rise to 6.9% this year, but ease to 5.8% in 2024. Inflation is not expected to return to target until 2025 in most economies around the world. — Keisha B. Ta-asan