The International Monetary Fund (IMF) on Wednesday cut its 2024 growth forecast for the Philippines to 5.8 percent from 6.0 percent in its July forecast, citing weakening domestic consumption and downside risks from major economies that could disrupt trade and financial flows.
“On the upside, an easing of global financial conditions, or faster than anticipated private investment linked to public-private partnerships and larger foreign direct investment (FDI) inflows, could stimulate higher growth,” it said.
The IMF also trimmed its 2025 growth projection for the country to 6.1 percent from its previous forecast of 6.2 percent.
IMF mission chief Elif Arbatli-Saxegaard said the revision reflects the fund’s view that private consumption would grow with less momentum. Saxegaard said higher inflation might have affected private consumption growth in the first half of 2024.
These forecasts are below the government’s target range of 6 percent to 7 percent this year and 6.5 percent to 7.5 percent next year.
Data from the Philippine Statistics Authority showed that the country’s GDP grew 6.0 percent in the first half despite the anemic growth in consumer spending.
The IMF also expects the Philippines’ current account deficit to reach 2.0 percent of the gross domestic product, lower than its initial estimate of 2.1 percent.
The IMF expects the current account deficit to represent 1.9 percent of GDP next year.
The IMF said a gradual reduction of interest rates is appropriate. “A data-dependent approach and careful communication around policy settings will help manage expectations amid uncertainty and more frequent supply-side shocks,” Saxegaard said.
The Bangko Sentral ng Pilipinas hinted of another 50-basis-point rate cut later this year, after implementing a 25-basis-point adjustment on Aug. 15, 2024.
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