The International Monetary Fund (IMF) raised its gross domestic product (GDP) forecast for the Philippines to 6.7% this year, but expects slower growth in 2023 amid global uncertainties.
IMF Representative to the Philippines Ragnar Gudmundsson said the GDP projection for the Philippines was hiked to 6.7% from 6.5% previously. This is within the government’s revised 6.5-7.5% target band for this year.
At the same time, the IMF lowered the Philippine GDP forecast to 5% for 2023, from 6.3% previously, due to global shocks.
In its latest World Economic Outlook (WEO) released on Tuesday, the multilateral lender maintained its 5.3% growth outlook for the five Association of Southeast Asian Nations (ASEAN) member countries this year.
The IMF downgraded the GDP growth for the ASEAN-5 to 5.1% next year, from the 5.9% forecast given in April.
In a press conference announcing the release of WEO on Tuesday evening, Division Chief of the IMF Research Department Daniel Leigh said the region’s outlook for 2022 reflects a big recovery from only 3.4% in 2021.
“And that owes to the success of the vaccination campaigns and strong labor markets in a number of these countries,” Mr. Leigh said. “But the slowdown in 2023 is a sharper one than what we had expected in April, we marked down 2023 by 0.8 percentage points.”
Mr. Leigh said growth outlook remains clouded by uncertainties caused by the slowdown in major economies such as the United States and China, and tightening monetary policy to fight rising inflation.
“Inflation is also rising in these economies as in many countries. For 2022 we have a 3% to 7% forecast depending on the country due to the various external shocks including the currency depreciation which is passing through in the cost of many items,” Mr. Leigh said.
Inflation rose by 6.1% year on year in June, the fastest in nearly four years and exceeded the central bank’s 2-4% target band for a third straight month. The average inflation rate in the first six months is 4.4%, still below the BSP’s full-year forecast of 5%.
The Bangko Sentral ng Pilipinas has raised benchmark interest rates by a total of 125 bps so far this year to tame inflation. On Tuesday, BSP Governor Felipe M. Medalla signaled an interest rate hike of less than 75 basis points (bps) at its next meeting in August 18.
Meanwhile, the IMF slashed the global GDP growth outlook to 3.2%, from 3.6% for this year and to 2.9%, from 3.6% for 2023.
“We know all ASEAN economies are very dependent on the external sector and in an environment in which the global economy is slowing down, this is going to have an impact on all ASEAN economies,” IMF Chief Economist Pierre-Olivier Gourinchas said. — K.B.Ta-asan