<\/p>\n
By Katherine K. Chan, <\/b>Reporter<\/i><\/p>\n
THE PHILIPPINE ECONOMY <\/span>could post its weakest growth <\/span>this yr <\/span>since <\/span>the pandemic, because the <\/span>Middle <\/span>East war drives up prices <\/span>and damp<\/span>ens economic activ<\/span>ity, the Interna<\/span>tional Monetary <\/span>Fund (IMF) said. <\/span><\/p>\n In its latest World Economic Outlook (WEO) released on Wednesday, the IMF trimmed its 2026 gross domestic product (GDP) growth forecast for the Philippines to three.9% from 4.1% previously. This remains to be inside the government\u2019s 3.5%-4.5% goal.<\/span><\/p>\n \u201cThis reflects a weaker-than-expected outturn in the primary quarter of 2026 (2.8%) alongside a larger-than-expected effect of the war within the Middle East on prices and activity within the Philippines,\u201d an IMF <\/span>spokesperson said in an e-mail. <\/span><\/p>\n Oil price shocks and the lingering impact of the flood control fallout dragged first-quarter Philippine GDP growth below market and gov<\/span>ernment expectations at 2.8%.\u00a0<\/span><\/p>\n Because the United States and Israel first launched attacks on Iran on Feb. 28, spiraling oil prices fed into the prices of other key commodities <\/span>and squeezed consumers\u2019 pockets.<\/span><\/p>\n If the IMF\u2019s projection holds true, the country\u2019s full-year expansion will probably be weaker than the 4.4% recorded in 2025, when a large flood control corruption scandal dampened public spending, investments, and sentiment.<\/p>\n It will also mark the economy\u2019s worst performance because the 9.5% contraction throughout the COVID-19 pandemic in 2020.\u00a0 \u00a0<\/span><\/span><\/p>\n Excluding the pandemic, it could match the three.9% expansion in 2011 and can be the worst in 17 years or because the 1.4% in 2009.<\/p>\n The multilateral lender\u2019s Philippine growth estimate is below its projection for ASEAN-5, which it kept at 4.1% for this yr. ASEAN-5 consists of Indonesia, Malaysia, the Philippines, Singapore, and Thailand.<\/span><\/p>\n The Philippines is anticipated to lag Indonesia (5%) and Malaysia (4.7%) but outpace Thailand (1.9%) this yr.<\/span><\/p>\n At the identical time, the IMF trimmed the Philippine growth projection for 2027 to five.5% from 5.8% previously, on the back of base effects and a possible improvement in sentiment.<\/p>\n That is inside the federal government\u2019s 5%-6% goal for the yr. Additionally it is above the IMF\u2019s 2027 growth projection of 4.3% for ASEAN-5.<\/span><\/p>\n \u201cThe rebound in 2027 is driven mainly by favorable base effects, alongside a gradual pickup in investment as confidence improves and supply-side effects related to the war <\/span>ease,\u201d the IMF spokesperson said.<\/span><\/p>\n Based on the multilateral lender, risks to domestic growth may come from extreme weather disturbances, in addition to a slower-than-projected normalization of public investments and reform<\/span> momentum. <\/span><\/p>\n Nevertheless, faster adoption of reforms, alongside lower oil and food prices, may provide relief to the economy.<\/p>\n \u201cOn the upside, accelerated implementation of structural and governance reforms can boost investment and FDI (foreign direct investment), increase fiscal multipliers and boost potential growth,\u201d the IMF spokesperson said. \u201cA faster decline in energy and food price provides additional upside risks.\u201d\u00a0<\/span><\/p>\n INFLATION RISKS REMAIN \u201cInflation risks are tilted to the upside, reflecting the chance of renewed geopolitical tensions within the Middle East and better food prices, de-anchoring of inflation expectations, tighter global monetary conditions, and lower remittances,\u201d the IMF spokesperson said. <\/span><\/p>\n The newest WEO doesn’t include an update on the IMF\u2019s inflation forecasts, but its projections as of April show it expects Philippine inflation to average 4.3% this yr and three.2% in 2027. <\/span><\/p>\n If realized, headline inflation will breach the Bangko Sentral ng Pilipinas\u2019 (BSP) 3% goal for 2 straight years, marking a pointy acceleration <\/span>from the 1.7% reading in 2025. <\/span><\/p>\n These are, nonetheless, slower than the central bank\u2019s projected 6.4% and 4.5% inflation for the subsequent two years.<\/p>\n As of June, Philippine inflation stood at 4.8%, with the headline print remaining above goal for 4 months in a row.<\/p>\n Alternatively, Pantheon Macroeconomics downgraded its inflation forecast to five.2% from 5.5% for <\/span>2026 and to three% from 3.2% for 2027.<\/span><\/p>\n This got here after June inflation got here in softer than market expectations at a three-month low of 6.4% amid easing pressures from food and fuel prices.<\/p>\n \u201cWe proceed to consider that the postwar surge within the headline rate is within the rear-view mirror, and that a sustained spell of disinflation should take it back inside the BSP\u2019s 2-to-4% goal range by March next yr on the earliest, barring any unexpected shocks, externally or domestically,\u201d Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco and Asia Economist Meekita Gupta said in a separate report on Wednesday.<\/p>\n Mr. Chanco and Ms. Gupta said the slowing inflation could prompt the BSP to chop its tightening cycle short with a possible pause in August.<\/p>\n The Monetary Board began to hike its policy rate in April as a preemptive measure to contain inflation risks from the energy crisis. <\/span><\/p>\n It delivered a second straight rate increase in June, bringing its total hikes to 50 basis points (bps). The benchmark rate now stands at 4.75%. <\/span><\/p>\n BSP Governor Eli M. Remolona, Jr. has said that the economy can still absorb one other 25-bp rise as they expect growth to start out rebounding within the second half. <\/span><\/p>\n \u201cThe Board is banking on fiscal policy to cushion the impact of upper rates on economic growth; specifically, a revival in public infrastructure spending, after it was hammered by last yr\u2019s anti-corruption drive,\u201d Mr. Chanco and Ms. Gupta said.<\/p>\n \u201cBut our chart below highlights that such expenditure remains to be collapsing; it fell in April \u2014 the most recent data \u2014 to its lowest level because the pandemic, after seasonal adjustment,\u201d they added.<\/span><\/p>\n The newest government data showed that its spending inched up by 4.81% to P2.6 trillion as of May from P2.48 trillion a yr earlier. This was slower than the 9.71% growth seen in the identical period last yr.<\/p>\n<\/p><\/div>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Vehicles and buses are seen along EDSA. The federal government is targeting 3.5-4.5% gross domestic product growth this yr. \u2014 PHILIPPINE STAR\/RYAN BALDEMOR By Katherine K. Chan, Reporter THE PHILIPPINE ECONOMY could post its weakest growth this yr since the pandemic, because the Middle East war drives up prices and dampens economic activity, the International […]<\/p>\n","protected":false},"author":1,"featured_media":363283,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[3431,4100,3340,1901,33507],"class_list":["post-363282","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-growth","tag-imf","tag-outlook","tag-philippine","tag-trims"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t
<\/b>Meanwhile, the multilateral <\/span>lender said the Philippines still faces inflationary pressures from volatile global conditions and elevated food prices, amongst others.<\/p>\n