By means of Luisa Maria Jacinta C. Jocson, Reporter
THE INTERNATIONAL Monetary Fund (IMF) said upside risks exist The outlook for Philippine headline inflation remains.
“Risks to the inflation outlook have diminished somewhat but remain positive,” an IMF representative said. Business world in an email.
“Food prices remain vulnerable to adverse supply shocks, and rising geopolitical tensions and recurring commodity price volatility also pose upside risks,” it added.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said earlier that the balance of risks to the inflation outlook next year until 2026 has been shifted upwards.
This is mainly due to expectations of higher electricity rates and minimum wages, he said.
Regional wage boards earlier this month approved an increase in the daily minimum wage of workers in Cagayan Valley, Central Luzon and Soccsksargen.
In July, the Regional Tripartite Council on Wages and Productivity also approved an increase in the minimum daily wage of P35 for workers in the National Capital Region.
Meanwhile, the IMF is watchingFThis year inflation will reach 3.3% and 3% in 2025.
The BSP expects inflation to average 3.1% this year and accelerate to 3.2% next year and 3.4% in 2026.
The IMF said “decisive monetary tightening and non-monetary measures” helped contain food productionFlation in the Philippines.
“Lower commodity prices have contributed to the entryFto within the target band of the BSP,” the report said.
Head inFInflation fell from 3.3% in August to 1.9% in September. The September print was also the slowest in more than four years or since 1.6% in May 2020.
Eat insideFGrowth fell to 1.4% from 4.2% a month ago. This while rice inflation fell sharply 5.7% in September, compared to 14.7% in August and 17.9% last year.
“The BSP cut its policy rate by 25 basis points (bps) at both the August and October meetings this year, in line with inflation and inflation expectations returning to target,” the IMF said.
Since the start of the easing cycle in August, the Monetary Board has cut the policy rate by 50 basis points, bringing the policy rate to 6%.
Mr Remolona previously said the central bank could implement another 25bp interest rate cut at the latest policy review on December 19.
CURRENT ACCOUNT
Meanwhile, the IMF expects the country’s current account deficit to decline further in the short term.
“The narrowing of the current accountFEconomic growth in 2024 and 2025 will be supported by lower commodity prices, a gradual recovery in exports, supported by tourism returning to pre-pandemic levels and demand for the business process outsourcing sector, which is holding up,” said the IMF.
The IMF expects the Philippines’ current account deficit to reach 2.2% of gross domestic product (GDP) this year and to decline further to 1.8% in 2025 and 1.1% in 2029.
“Domestic remittances are also expected to rise slightly,” it added.
In the January-August period, remittances rose 2.9% to $22.22 billion, compared with $21.58 billion a year earlier. The BSP expects remittances to grow 3% this year.
“Over the medium term, the current account is expected to be supported by continued gradual increases in exports,” the IMF said.
“From a savings and investment perspective, the improvement in the current account is expected to be driven by an increase in private and public savings, the latter underpinned by the government’s plans for a gradual Fiscal consolidation,” it added.
In the Ffirst half of the year, the country’s current account theFicit amounted to US$7.1 billion, accounting for 3.2% of GDP.
The BSP expects the current account to…FThis year it is expected to reach $6.8 billion, or 1.5% of GDP.