IMF retains Philippines growth outlook for 2024, 2025

The International Monetary Fund (IMF) has retained its growth prospects for the Philippines for this year and next amid challenging private consumption expansion in the country.

Based on the World Economic Outlook (WEO) released yesterday, the Washington-based multilateral lender kept its gross domestic product (GDP) assumption for the Philippines at 5.8 percent.

This was the same forecast the IMF gave the Philippines during the 2024 IMF Article IV consultation earlier this month.

While this is an improvement from last year’s 5.5 percent expansion, it falls below the six to seven percent growth assumption set by the Cabinet-level Development Budget Coordination Committee (DBCC).

The IMF said private consumption is going to grow slightly with less momentum. The sector’s growth during the first semester was lower than expected due to more expensive food prices.

Private consumption rose by 4.6 percent in the second quarter, slower than the 5.5 percent growth in the same period last year.

IMF’s growth forecast for the Philippines remains one of the highest in the region, next to Vietnam’s 6.1 percent.

This year, the Philippines is expected to grow faster than Indonesia, Thailand, Malaysia and even China.

Likewise, the IMF retained its 6.1-percent GDP assumption for 2025, also way below the 6.5 to 7.5-percent target of the economic team.

For inflation, the IMF also did not change its inflation forecast for the Philippines, which would ease to 3.3 percent this year and further to three percent in 2025.

The latest data showed that the September inflation eased to an over four-year low of 1.9 percent, even falling below the expectation of the Bangko Sentral ng Pilipinas.

The sharp reduction was primarily due to slower increases in the prices of food and non-alcoholic beverages, as well as transport and housing water, electricity, gas and other fuels.

In its report, the IMF noted that the global battle against inflation has essentially been won, even though price pressures persist in some countries.

However, the IMF also warned that downside risks to inflation are rising, specifically with the escalation in regional conflicts, monetary policy remaining tight for too long, growth slowdown in China and continued protectionist policies of some countries.

World Economic Outlook 2024

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Source: Philstar

IMF trims 2024 Philippine growth forecast to 6%

The International Monetary Fund (IMF) has cut its growth projections for the Philippines following a slowdown in private consumption.

Elif Arbatli-Saxegaard, chief of a visiting IMF mission, told a briefing on Wednesday that the global lender now expects the country to grow by 5.8 percent this year, down from a July forecast of 6.0.

The outlook for 2025 was also trimmed, to 6.1 percent from 6.2 percent.

Both forecasts fall below the government's 6.0- to 7.0-percent target for 2024 and the 6.5-7.5 percent for the following year.

"The downward revision from our July forecast reflects our view that private consumption is going to grow slightly with less momentum," Saxegaard said.

She qualified, however, that "the downgrade is very small and reflects the fact that the first half private consumption growth was lower than what we had anticipated."

This was likely due to high food prices, Saxegaard added.

"With the ongoing efforts of the Philippine government, including nonmonetary efforts to reduce food prices and especially rice prices, we do think that this will be supportive of consumption growth going forward."

Gross domestic product (GDP) growth averaged 6.0 in the first half following a below-target 5.8 percent in January-March and a better-than-expected 6.3 percent in the second quarter.

Finance Secretary Ralph Recto last month said that growth could hit 6.1 percent this year, to be helped by slower inflation.

GDP growth was just 5.5 percent last year, missing the 6.0- to 7.0-percent target, as high interest rates and inflation dampened household spending.

Inflation, which hit a 14-year high of 8.7 percent in January last year, has since returned to the 2.0- to 4.0-percent goal. It eased to 3.3 in August and is expected to end the year well within target.

The IMF trimmed its forecast for 2024 inflation to 3.3 percent and said the rate would moderate to 3.0 percent next year.

"That would be supported by lower food and core inflation remaining well within the target," Saxegaard said.

"Downside risks to the outlook could include a slowdown in major economies that could disrupt trade and financial flows, commodity price volatility and supply shocks, and an escalation of geopolitical tensions," she added.

"However, an easing of global financial conditions, or faster than anticipated private investment linked to public-private partnerships and larger foreign direct investments inflows could stimulate higher growth."

Lower inflation has allowed the Bangko Sentral ng Pilipinas (BSP) to start lowering key interest rates, in August announcing a 25 basis point (bps) cut.

Amid speculation whether the BSP would opt to follow the jumbo 50-bps cut announced by the US Federal Reserve last month, the IMF said a "gradual" easing would be appropriate.

"With inflation and inflation expectations returning to target, a continued gradual reduction of the policy rate is appropriate," Saxegaard said.

"Along this declining rate path, it will be still important for the BSP to anchor inflation expectations in the target band and remain data dependent and agile."

The IMF, however, declined to suggest a pace and magnitude for potential cuts at the BSP's policy-setting meetings on October 16 and December 19.

BSP Governor Eli Remolona said on Monday that they had scope to do a 50-basis-point rate cut in one policy meeting, but such a big reduction would only happen if there were worries about a so-called hard landing for the economy.

The Philippines' current account deficit, meanwhile, is now expected to hit 2.0 percent of GDP this year compared to the 2.1 percent forecast in June.

It expects the shortfall to hit 1.9 percent next year.

Source: Manila Times

Philippines likely to post one of the fastest growth rates in Asia

The Philippines will likely post the second-fastest growth in Asia this year and in 2025, the International Monetary Fund (IMF) said.

In its latest World Economic Outlook report, the IMF maintained its gross domestic product (GDP) growth forecast for the Philippines at 6% this year and 6.2% in 2025.

If realized, the Philippine economic growth would be the second fastest among selected Asian economies, after India’s 7.5% GDP growth forecast.

The Philippines’ growth forecast for 2024 is faster than China (5%), Indonesia (5%), Malaysia (4.4%), Kazakhstan (3.5%), and Iran (3.3%), the IMF said.

It would also surpass Thailand (2.9%), Egypt (2.7%), Korea (2.5%), Pakistan (2%), Saudi Arabia (1.7%), and Japan (0.7%).

“Asia’s emerging market economies remain the main engine for the global economy,” Pierre-Olivier Gourinchas, economic counsellor and the director of research of the IMF, said in a statement.

The IMF maintained its global growth projection at 3.2% in 2024 and 3.3% in 2025, “broadly unchanged” from the previous report’s forecasts.

The IMF cut the United States growth forecast to 2.6% this year, but kept the growth estimate at 1.9% for 2025.

“The forecast for growth in emerging market and developing economies is revised upward; the projected increase is powered by stronger activity in Asia, particularly China and India,” it said.

The IMF raised its forecasts for emerging market and developing Asia, which is seen to grow by 5.4% this year and by 5.1% in 2025.

The growth projection for China was also raised to 5% for this year, “primarily on account of a rebound in private consumption and strong exports in the first quarter.” China’s growth is expected to slow to 4.5% next year, and “to continue to decelerate over the medium term to 3.3% by 2029, because of headwinds from aging and slowing productivity growth.”

However, “prospects for the next five years remain weak, largely because of waning momentum in emerging Asia,” IMF said.

The IMF said risks to the outlook “remain balanced” although upside risks to inflation “stem from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.”

“The risk of elevated inflation has raised the prospects of higher-for-even-longer interest rates, which in turn increases external, fiscal, and financial risks,” it said.

“Prolonged dollar appreciation arising from rate disparities could disrupt capital flows and impede planned monetary policy easing, which could adversely impact growth.

Persistently high interest rates could raise borrowing costs further and affect financial stability if fiscal improvements do not offset higher real rates amid lower potential growth.”

During its last policy meeting, the US Federal Reserve left interest rates unchanged at 5.25%-to-5.5%. Fresh projections from policy makers showed them dialing back expectations for rate cuts this year from three to just one, Reuters reported.

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Source: Business World and IMF