By means of Beatriz Marie D. Cruz, Reporter
The PHILIPPINES are expected to be one of the fastest growing economies in Southeast Asia through 2029, according to the International Monetary Fund (IMF).
In its latest World Economic Outlook (WEO), the IMF maintained the Philippine gross domestic product (GDP) growth outlook this year at 5.8%, lower than the government’s target of 6-7%. This is the same forecast given after the Article IV Consultation Mission briefing earlier this month.
This would make the Philippines the second fastest growing economy in Southeast Asia, behind Vietnam (6.1%) and ahead of Cambodia (5.5%), Indonesia (5%), Malaysia (4.8%), Laos (4.1%), Timor-Leste (3%), Thailand (2.8%), Singapore (2.6%), Brunei (2.4%) and Myanmar (1%).
For 2025, the IMF maintained its GDP growth projection for the Philippines at 6.1%, lower than the government’s target of 6.5-7.5%.
The Philippines and Vietnam are expected to show the fastest growth in the region by 2025, ahead of Cambodia (5.8%), Indonesia (5.1%), Malaysia (4.4%), Laos (3.5%) , East Timor (3.1%), Thailand (3%), Brunei (2.5%), Singapore (2.5%) and Myanmar (1.1%).
“Growth in 2024 and 2025 will be driven by strengthening domestic demand, supported by a gradual easing of monetary policy,” an IMF representative said in an email.
“Consumption growth will be boosted by lower food prices and the upcoming midterm elections, while investment growth is expected to pick up thanks to a continued boost in public investment and gradually declining borrowing costs.”
Philippine growth will be faster than that of emerging and developing Asia, which is expected to grow 5.3% and 5% in 2024 and 2025, respectively.
“Emerging Asia’s strong growth is expected to decline from 5.7% in 2023 to 5% in 2025,” the IMF said.Fpoints to the continued slowdown in growth in China and India.
“In the absence of a strong commitment to structural reforms, output growth is expected to remain weak in the medium term.”
The IMF expects growth in the region to be supported by continued demand for semiconductors and electronics, as well as increasing investment in artificial intelligence (AI).
The IMF also expects Philippine GDP to grow 6.3% through 2029, still the fastest in Southeast Asia, ahead of Cambodia (6%) and Vietnam (5.6%).
“Medium-term growth of 6.3% is expected to be supported by investment, thanks to an acceleration in the implementation of PPP (public-private partnership) projects and FDI (foreign direct investment), following recent regulatory and administrative reforms , the IMF representative said.
However, the IMF representative said potential risks that could weigh on economic growth include new supply shocks, escalating geopolitical tensions, tighter and longer monetary policy and an unexpected slowdown in major economies.
“Domestic, the recovery in private investment could be weaker than expected if reform momentum stalls or reform returns generate lower-than-expected returns. On the positive side, the recovery in investment and productivity gains from reforms could be greater,” the IMF representative said.
Meanwhile, the IMF maintained the Philippine inflation forecast at 3.3% in 2024, which is higher than the Bangko Sentral ng Pilipinas’ (BSP) revised in 2024.Festimate projection of 3.1%.
For 2025, the IMF expects inflation of 3%, which is lower than the BSP projection of 3.2%.
‘ALMOST WON’
The IMF said global growth was likely to remain “stable but still disappointing” as it kept GDP growth forecasts at 3.2% this year and next.
It noted that the global economy has remained “unusually resilient” and avoided a recession.
“The global battle against inflation has largely been won, even if price pressures persist in some countries,” IMF economic adviser Pierre-Olivier Gourinchas said in the WEO report.
Globally inFGrowth is expected to reach 3.5% by the end of 2025, slightly below the average of 3.6% between 2000 and 2019.
In emerging Asia, inflation is projected at 2.1% this year and 2.7% in 2025, “partly thanks to early monetary tightening and price controls in many countries in the region,” the IMF said.
“While the global decline in inflation is an important milestone, downside risks are increasing and now dominate the outlook: an escalation of the regional economy.Flicences, monetary policy remaining tight for too long, a possible resurgence in financial market volatility with negative consequences for sovereign debt markets, a deeper growth slowdown in China and the continued intensification of protectionist policies,” he said.
With inflation returning near the central bank’s targets, Mr Gourinchas said a triple pivot is now needed.
The turnaround in monetary policy has begun as major central banks have started cutting policy rates, he said. However, vigilance is crucial amid an economic revivalFlationary pressures due to high food prices and supply disruptions, he added.
The Philippine central bank started its easing cycle in August with a 25 basis points (bp) cut, followed by another 25 bp cut at its October 16 meeting. This brought the target reverse repurchase (RRP) interest rate to 6%.
BSP Governor Eli M. Remolona Jr. announced another possible 25 bp interest rate cut during the Monetary Board’s final meeting for the year on December 19.
Mr. Gourinchas said the second pivot is fiscal policy, because now is the time “to stabilize debt dynamics and rebuild a lot of debt.”budget buffers needed.”
“The third pivot – and the most difficult – concerns structural reforms. Much more needs to be done to improve growth prospects and increase productivity, as this is the only way we can tackle the many challenges we face: rebuilding fiscal buffers, aging and shrinking populations in many parts of the world, Africa’s young and growing populations seeking opportunity, tackling the climate transition, increasing resilience and improving the lives of the most vulnerable,” he said.