By means of Luisa Maria Jacinta C. Jocson, Reporter
THE International Monetary Fund (IMF) has shortened its eco policyeconomic growth forecasts for the Philippines as increased inflation is likely to continue to weigh on domestic demand.
The multilateral institution lowered the country’s gross domestic product (GDP) outlook for this year to 5.8% from 6% previously. It now also sees GDP growing 6.1% in 2025, slightly less than the previous forecast of 6.2%.
The IMF’s growth estimates fall short of the government’s 6-7% and 6.5-7.5% GDP forecasts for this year and 2025 respectively.
“The downward revision of our July forecast mainly concernsFreflects our view that private consumption will grow slightly with less momentum,” IMF mission chief Elif Arbatli Saxegaard said at a press conference.Fon Wednesday.
“I would like to emphasize that the downgrade is very small and realFpoints out the fact that the FPrivate consumption growth in the first half was lower than we expected, and this could be partly due to high food prices.”
The Philippine economy grew 6.3% in the second quarter, the fastest growth in five quarters. However, household spending remained “anemic,” rising by just 4.6% in the second quarter, compared to 5.5% a year ago.
“With the continued eFfortresses, including non-monetary eFAlthough we are trying to reduce food prices and especially rice prices, we believe this will support consumption growth in the future,” said Ms Saxegaard.
She said risks to the growth outlook are skewed to the downside, with risks arising from an expected slowdown in major economies, commodity price volatility, supply shocks and geopolitical tensions.
“On the positive side, an easing of global financial conditions or faster-than-expected private investment, for example linked to public-private partnerships, or greater inflows of foreign direct investment (FDI) could drive higher growth,” she said.
Ms. Saxegaard also noted that growth projections for the Philippines remain among the highest in the region.
“The 6.1% growth for 2025 is a very respectable growth rate… so it is a very small adjustmentFthe result in the reading Ffirst half.”
She also noted that the Philippine economy “signiFgreat potential” in its natural resources, the blue economy and the demographic dividend.
“What we believe will be very crucial for the medium term is the potential to unlock this medium-term growth potential through comprehensive and well-coordinated structural reforms.”
Meanwhile, the IMF sees the headlines appearingFon average 3.3% in 2024 and 3% in 2025.
These are slightly lower than the Bangko Sentral ng Pilipinas (BSP) annual forecasts of 3.4% and 3.1% for this year and in 2025, respectively.
“That would be supported by less food and fewer core importsFWe remain well within the target,” Ms Saxegaard said.
Ms Saxegaard said risks to the inflation outlook remain tilted to the upside due to recurring commodity price shocks and possible supply shocks.
“We believe that decisive monetary tightening and other measures have helped ease inflationary pressures in the Philippines, that recent tariff cuts on imported rice and other non-monetary measures have helped lower food prices and that they are making headlines should be reduced further.Fby the end of the year,” she said.
‘GRADUAL REDUCTION’
The IMF said the Philippine central bank may start gradually cutting interest rates.
“InsideFWith inflation already within the target range, even as inflation expectations have fallen and a small negative output gap has emerged, we believe that a gradual further reduction in the policy rate is appropriate. That is our current advice,” she said.
At its August 15 meeting, the BSP began cutting interest rates for the US FFor the first time in almost four years. It cut the benchmark rate by 25 basis points to 6.25%, from a 17-year high of 6.5%.
“The data-dependent approach and careful communication around policy settings will help manage expectations, uncertainty and more frequent supply-side shocks,” Saxegaard said.
IMF representative for the Philippines Ragnar Gudmundsson said the BSP should also take into account that both upside and downside risks to inflation still exist.
“That is why the data-dependent approach is very important. So yes, there is some relaxation, but caution is still required in the coming months due to an uncertain environment,” he added.