By Luisa Maria Jacinta C. Jocson, Reporter
THE Worldwide Financial Fund (IMF) trimmed its economic progress forecasts for the Philippines as elevated inflation is more likely to proceed weighing on home demand.
The multilateral establishment lower the nation’s gross home product (GDP) outlook for this yr to five.8% from 6% beforehand. It additionally now sees GDP increasing by 6.1% in 2025, a tad decrease than the earlier forecast of 6.2%.
The IMF’s progress estimates fall wanting the federal government’s 6-7% and 6.5-7.5% GDP forecasts for this yr and 2025, respectively.
“The downward revision from our July forecast primarily reflects our view that non-public consumption goes to develop barely with much less momentum,” IMF Mission Chief Elif Arbatli Saxegaard stated at a press briefing on Wednesday.
“I want to spotlight that the downgrade may be very small and reflects the truth that the first-half non-public consumption progress was decrease than what we had anticipated, and this is likely to be partially pushed by the excessive meals costs.”
The Philippine economic system grew by 6.3% within the second quarter, the quickest progress in 5 quarters. Nevertheless, family spending continued to be “anemic” because it rose by simply 4.6% within the second quarter from 5.5% a yr in the past.
“With the continuing efforts, together with non-monetary efforts to scale back meals costs and particularly rice costs, we do suppose that this might be supportive of consumption progress going ahead,” Ms. Saxegaard stated.
She stated that dangers to the expansion outlook are tilted to the draw back, with dangers stemming from an anticipated slowdown in main economies, commodity worth volatility, provide shocks and geopolitical tensions.
“On the upside, an easing of world monetary situations or faster-than-anticipated non-public funding, for instance, linked to the public-private partnerships or bigger international direct funding (FDI) inflows might stimulate increased progress,” she stated.
Ms. Saxegaard additionally famous its progress projections for the Philippines stay one of many highest within the area.
“It’s 6.1% progress for 2025 is a really respectable progress fee… so it’s a really small adjustment reflecting the outturn within the first half.”
She additionally famous that the Philippine economic system “holds significant potential” in its pure sources, blue economic system and demographic dividend.
“In our view, what might be very important for the medium time period is the potential to unlock this medium-term progress potential by complete and well-sequenced structural reforms.”
In the meantime, the IMF sees headline inflation averaging 3.3% in 2024 and three% in 2025.
These are barely decrease than the Bangko Sentral ng Pilipinas’ (BSP) full-year forecasts of three.4% and three.1% for this yr and in 2025, respectively.
“That will be supported by decrease meals and core inflation remaining nicely throughout the goal,” Ms. Saxegaard stated.
Ms. Saxegaard stated that dangers to the inflation outlook stay tilted to the upside attributable to recurring commodity worth shocks and any potential provide shocks.
“We consider that the decisive financial tightening and different measures have helped mitigate inflationary pressures within the Philippines, current tariff cuts on imported rice and different non-monetary measures helped cut back meals costs and will additional cut back headline inflation by the yr finish,” she stated.
‘GRADUAL REDUCTION’
The IMF stated that the Philippine central financial institution can start regularly lowering rates of interest.
“With inflation already coming all the way down to throughout the goal band, additionally with inflation expectations coming down, and the opening of a small destructive output hole, we do suppose {that a} gradual continued discount within the coverage fee is suitable. That’s our present recommendation,” she stated.
At its Aug. 15 assembly, the BSP started chopping rates of interest for the first time in almost 4 years. It diminished the benchmark rate of interest by 25 foundation factors to six.25% from the over 17-year excessive of 6.5%.
“The info-dependent method and cautious communication round coverage settings will assist handle expectations and uncertainty and extra frequent supply-side shocks,” Ms. Saxegaard stated.
IMF Consultant to the Philippines Ragnar Gudmundsson stated that the BSP also needs to keep in mind that there are nonetheless each upside and draw back dangers to inflation.
“For this reason the data-dependent method is essential. So, sure, there may be loosening, however warning remains to be mandatory within the coming months due to an unsure surroundings,” he added.
