By Luisa Maria Jacinta C. Jocson, A reporter
International Monetary Fund (IMF) adjusted its economic growth forecasts for the Philippines as high inflation it is likely to continue to moderate domestic demand.
The international agency lowered its outlook for the country’s gross domestic product (GDP) this year to 5.8% from 6%. It now sees GDP growing at 6.1% in 2025, which is significantly lower than the previous forecast of 6.2%.
IMF growth estimates fall short of government forecasts of 6-7% and 6.5-7.5% of GDP for this year and 2025, respectively.
“The downward revision of our forecast for July is mainly a restatementfit expresses our view that private consumption will gradually increase,” said the Head of the IMF Mission Elif Arbatli Saxegaard in a press conference.fon Wednesday.
“I would like to highlight that the reduction is very small and againfdiscovers the fact that fPrivate consumption growth in the first half was lower than we expected, and this may be partly due to higher food prices.”
The Philippine economy grew 6.3% in the second quarter, the fastest growth in five quarters. However, housing consumption continued to be “anemic” as it rose 4.6% in the second quarter from 5.5% last year.
“With efforts, including non-monetary efto reduce food prices and especially rice prices, we think that this will support the growth of purchases going forward,” said Ms. Saxegaard.
He said risks to the growth outlook have deteriorated, with risks arising from an expected slowdown in major economies, commodity price volatility, commodity shocks and political tensions.
“On the other hand, a reduction in global financial conditions or a faster-than-expected private investment, for example, linked to public-private partnerships or greater foreign direct investment (FDI) could come in.” encourage high growth,” he said.
Mrs. Saxegaard also noted that the Philippines’ growth projection remains one of the highest in the region.
“6.1% growth by 2025 is a very respectable growth rate…fto get the result on fthe first part.”
He also noted that the Philippine economy is “carrying a signal.”fIcant potential” in its natural resources, green economy and human capital.
“In our view, what will be most important in the medium term is the ability to unlock this opportunity for short-term growth through comprehensive and well-sequenced structural reforms.”
Meanwhile, the IMF sees a topicfAverage of 3.3% in 2024 and 3% in 2025.
These are slightly lower than the Bangko Sentral ng Pilipinas’ (BSP) full-year forecasts of 3.4% and 3.1% this year and 2025, respectively.
“That will be supported by low food and core infstaying well in the target,” said Ms. Saxegaard.
Mrs. Saxegaard said deflationary risks remain on the upside due to commodity price shocks and any potential shocks.
“We believe that monetary tightening and other measures have helped reduce inflationary pressures in the Philippines, the recent tax cuts on imported rice and other non-monetary measures have helped reduce food prices and should further reduce the headlinefit’s been a year,” he said.
‘THE REDUCTION OF KAZANE’
The IMF said the Philippine central bank may start gradually lowering interest rates.
“Insidefrate falling already within the target band, with inflation expectations, and the opening of a small negative output gap, we think that a gradual lowering of the policy rate is appropriate. That is our current advice,” he said.
At its August 15 meeting, the BSP began cutting interest rates fthe first time in almost four years. It cut the benchmark interest rate by 25 basis points to 6.25% from a 17-year high of 6.5%.
“A data-driven approach and careful communication about policy settings will help manage expectations and uncertainties and side shocks that often arise,” said Ms. Saxegaard.
IMF Philippine Representative Ragnar Gudmundsson said the BSP should also consider that there are still both upside and downside risks to inflation.
“That’s why a data-driven approach is so important. So, yes, there is some slack, but vigilance is still needed in the coming months because of the unsome place,” he added.
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