DOMESTIC demand and gradual monetary easing will drive Philippine economic growth this year and the next, the International Monetary Fund (IMF) said as it retained forecasts announced earlier this month.
“Consumption growth will be buoyed by lower food prices and the upcoming midterm elections, while investment growth is expected to pick up on the back of a sustained public investment push and gradually declining borrowing costs,” a spokesman said.
A visiting IMF mission last October 3 announced that the Washington-based lender was trimming its 2024 gross domestic product (GDP) growth forecast to 5.8 percent, from 6.0 percent in July, as private consumption had slowed in the first half.
The outlook for 2025 was also trimmed to 6.1 percent from 6.2 percent.
Both forecasts fall below the government’s 6.0- to 7.0-percent target for 2024 and the 6.5-7.5 percent for the following year.
The IMF also forecast growth to hit 6.3 percent in 2029, data from the latest World Economic Outlook showed.
The projections for 2024, 2025 and 2029 are higher than the 5.3-percent, 5.0-percent and 4.5-percent growth, respectively, seen for emerging and developing Asia and the 4.5 percent expected for both this year and next year for the Asean-5 economies.
Global growth, meanwhile, is expected to hit 3.2 percent this year and the next. The 2024 forecast is unchanged from July, while that for next year was trimmed from 3.3 percent previously.
Philippine inflation is expected to stay within the 2.0- to 4.0-percent target at 3.3 percent and 3.0 percent, respectively, in 2024 and 2025 and hit 3.0 percent in 2029.
The country’s current account balance was forecast at -2.2 percent and -1.8 percent of GDP for this year and the next, and narrow to -1.1 percent in 2029.
Unemployment, lastly, was seen hitting 4.4 percent this year and 5.2 percent next year.
The IMF spokesperson said that medium-term Philippine growth would be spurred by public-private partnership (PPP) projects and foreign direct investments (FDI).
Risks to the outlook, meanwhile, are tilted towards the downside and include an escalation in geopolitical tensions and an extended monetary policy easing and unexpected slowdowns in advanced economies.
If reform momentum also slows or fails to yield the expected results, private investment growth could fall short of projections.
Conversely, stronger-than-anticipated investment and productivity gains from reforms could provide an upside to the growth forecasts.
The IMF also cautioned that commodity price fluctuations or supply disruptions could pressure the central bank to tighten monetary policy to manage inflation, which, in return, may affect the country’s growth potential.
The Bangko Sentral ng Pilipinas (BSP) embarked on an easing cycle in August and has now cut key interest rates twice by 25 basis points each time, citing an improved inflation outlook.
The BSP’s benchmark rate currently stands at 6.0 percent and another 25-bps cut expected in December will lower this to 5.75 percent by the end of 2024.
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