IMF downgrades PH economic growth forecasts

The International Monetary Fund (IMF) has trimmed its Philippine economic growth forecasts for this year and the next, indicating that the country may not be able to meet its targets due to weaker-than-expected private consumption.

According to the IMF, it now expects the Philippine economy to expand by 5.8% this year, slower than the 6.0% projection made in its July World Economic Outlook (WEO) Report.

“(This) mainly reflects our view that private consumption is going to growth slightly with less momentum,” IMF mission chief Elif Arbatli-Saxegaard said in a press briefing at the BSP Headquarters in Manila City.

Should this be realized, this will be lower than the government’s target range of 6.0% to 7.0%, but higher than the 5.6% growth recorded in 2023.

“The first-half private consumption growth was lower than what we had anticipated, and this might in part be driven by the high food prices,” Saxegaard told reporters.

“With the ongoing efforts including non-monetary efforts to reduce food prices and rice prices, we believe that this will be supported by consumption growth moving forward,” she added.

The heavily weighted food and non-alcoholic beverages index saw a 6.1% inflation rate at the end of the first half, which has since slowed to 3.9% in August. The government is set to release September inflation figures on Friday, October 4.

Inflation is expected to average 3.3% this year, within the central bank’s target range of 2.0% to 4.0%, before decelerating further to 3.0% in 2025.

With the inflation expectations returning towards target, Saxegaard said a continued gradual reduction of the policy rate is appropriate.

“A data-dependent approach and careful communication around policy settings will help manage expectations amid uncertainty and more frequent supply-side shocks,” she said.

The Bangko Sentral ng Pilipinas (BSP) started easing policy rates in August, with a 25-basis-point cut. Governor Eli Remolona Jr. has since hinted at the possibility of delivering a 50-basis-point reduction in one meeting.

The IMF on Wednesday also announced a downgrade in its economic growth forecast for 2025 to 6.1% from 6.2% previously, also due to weaker private consumption.

“Downside risks to the outlook stem from a slowdown in major economies that could disrupt trade and financial flows; commodity price volatility and supply shocks; and an escalation of geopolitical tensions or regional conflicts,” the IMF said.

“On the upside, an easing of global financial conditions, or faster than anticipated private investment linked to public-private-partnerships and larger FDI (foreign direct investment) inflows, could stimulate higher growth,” it added. —KBK, GMA Integrated News