IMF maintains growth outlook for PHL

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A vendor tends to a customer at a public market in Quezon City, Metro Manila, Philippines, Oct. 4, 2024. — REUTERS

By Beatriz Marie D. Cruz, Reporter

THE PHILIPPINES is predicted to be one among the fastest-growing economies in Southeast Asia through 2029, in line with the International Monetary Fund (IMF).   

In its latest World Economic Outlook (WEO), the IMF kept the Philippine gross domestic product (GDP) growth outlook at 5.8% this 12 months, which is below the federal government’s 6-7% goal. This is identical forecast given after the Article IV Consultation Mission briefing earlier this month.

This might 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 kept its GDP growth projection for the Philippines at 6.1%, which is lower than the federal government’s 6.5-7.5% goal.

The Philippines and Vietnam are expected to post the fastest growth within the region in 2025, ahead of Cambodia (5.8%), Indonesia (5.1%), Malaysia (4.4%), Laos (3.5%), Timor Leste (3.1%), Thailand (3%), Brunei (2.5%), Singapore (2.5%) and Myanmar (1.1%).

“Growth in 2024 and 2025 is driven by a pickup in domestic demand, supported by gradual monetary policy easing,” a representative of the IMF said in an e-mail.

“Consumption growth will likely be buoyed by lower food prices and the upcoming midterm elections, while investment growth is predicted to select up on the back of a sustained public investment push, and progressively declining borrowing costs.”

Philippine growth will likely be faster than emerging and developing Asia, which is projected to expand by 5.3% and 5% in 2024 and 2025, respectively.

“Emerging Asia’s strong growth is predicted to subside from 5.7% in 2023 to five% in 2025,” the IMF said, adding that this reflects the sustained slowdown in China and India.

“Absent a robust drive for structural reforms, output growth is predicted to stay weak over the medium term.”

The IMF sees growth within the region to be supported by sustained demand for semiconductors and electronics, in addition to increasing investments in artificial intelligence (AI).

The IMF also expects Philippine GDP to expand by 6.3% until 2029, still the fastest in Southeast Asia, ahead of Cambodia (6%) and Vietnam (5.6%).

“Growth over the medium term at 6.3% is predicted to be supported by investment, on the back of an acceleration within the implementation of PPP (public-private partnership) projects and FDI (foreign direct investments), following recent regulatory and administrative reforms,” the IMF representative said.

Nonetheless, the IMF representative said potential risks that would weigh on economic growth include recent supply shocks, escalating geopolitical tensions, tighter-for-longer monetary policy and an unexpected slowdown in major economies.

“Domestically, the pickup in private investment could also be weaker than projected if reform momentum stalls or payoffs from reforms generate lower-than-expected returns. On the upside, the pickup in investment and productivity gains from reforms could possibly be higher,” the IMF representative said.

Meanwhile, the IMF maintained the Philippine inflation forecast at 3.3% in 2024, which is above the Bangko Sentral ng Pilipinas’ (BSP) revised inflation projection of three.1%.

For 2025, the IMF sees inflation at 3%, which is below the BSP’s 3.2% projection.

‘ALMOST WON’
The IMF said global growth would likely remain “stable yet underwhelming,” because it kept GDP growth projections at 3.2% this 12 months and next 12 months.

It noted the worldwide economy has remained “unusually resilient” and avoided a recession.

“The worldwide battle against inflation has largely been won, regardless that price pressures persist in some countries,” IMF Economic Counsellor Pierre-Olivier Gourinchas said within the WEO report.

Global inflation is forecast to succeed in 3.5% by end-2025, barely below the three.6% average between 2000 and 2019.

In emerging Asia, inflation is projected at 2.1% this 12 months and a couple of.7% in 2025, “partially because of early monetary tightening and price controls in lots of countries within the region,” the IMF said.

“While the worldwide decline in inflation is a significant milestone, downside risks are rising and now dominate the outlook: an escalation in regional conflicts, monetary policy remaining tight for too long, a possible resurgence of monetary market volatility with adversarial effects on sovereign debt markets, a deeper growth slowdown in China, and the continued ratcheting up of protectionist policies,” he said.

With the return of inflation to close central bank targets, Mr. Gourinchas said a policy triple pivot is now needed.

The pivot on monetary policy has began, as major central banks began cutting policy rates, he said. Nonetheless, vigilance is vital amid a resurgence in inflationary pressures because of high food prices and provide disruptions, he added.

The Philippine central bank began its easing cycle in August with a 25-basis-point (bp) cut, followed by one other 25-bp reduction at its Oct. 16 meeting. This brought the goal reverse repurchase (RRP) rate to six%.

BSP Governor Eli M. Remolona, Jr. has signaled one other possible 25-bp rate cut on the Monetary Board’s last meeting for the 12 months on Dec. 19.

Mr. Gourinchas said the second pivot is on fiscal policy, as now could be the time “to stabilize debt dynamics and rebuild much-needed fiscal buffers.”

“The third pivot — and the toughest — is on structural reforms. Way more must be done to enhance growth prospects and lift productivity, as that is the one way we will address the various challenges we face: rebuilding fiscal buffers, aging and declining populations in lots of parts of the world, young and growing populations in Africa in quest of opportunity, tackling the climate transition, increasing resilience, and improving the lives of essentially the most vulnerable,” he said.

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