IMF bullish on Philippine economy

WASHINGTON, April 23 ------ The Philippines will likely sustain its growth momentum this year, supported by robust consumer demand and China’s reopening, the International Monetary Fund (IMF) said.

IMF Director of the Asia and Pacific Department Krishna Srinivasan said the country will likely benefit from China’s reopening this year.“The Philippines is one country that would benefit from an opening up of China, so there are upside risks to growth going forward,” Mr. Srinivasan said during the Asia-Pacific regional economic outlook press briefing here last week.

China’s reopening should lead to higher net exports and more tourism activities in the Philippines, IMF Deputy Director of the Asia and Pacific Department Sanjaya Panth said in an interview with BusinessWorld.In its latest World Economic Outlook report, the IMF raised its 2023 gross domestic product (GDP) growth projection for the Philippines to 6%, from the 5% forecast given in January. This matched the lower end of the government’s 6-7% target for this year. Mr. Panth said the growth forecast for the Philippines was upgraded due to a better-than-expected fourth-quarter performance last year as well as strong consumer demand.

“It’s a combination of all three. The very strong path that been coming from already towards the end of last year, the continued strong consumer demand, and the more positive outlook following China’s reopening,” he said.

The Philippine economy expanded by an annual 7.2% in the fourth quarter, bringing the 2022 full-year expansion to 7.6%, the quickest since 1976. Domestic consumption helped drive growth, rising 8.3% in 2022 as Filipinos spent more on restaurants and travel. However, elevated inflation is still a concern as it has remained above the 2-4% target range of the Bangko Sentral ng Pilipinas (BSP) for a year, Mr. Panth said.

“Headline inflation eased a little bit in March on a year-to-year basis. But it’s also important to keep in mind that it has been above the upper end of the Bangko Sentral’s target range for 12 months now,” he said.

Inflation slowed to 7.6% in March from 8.6% in February, bringing the first-quarter average to 8.3%. This is still way above the central bank’s full-year forecast of 6% and the 2-4% target range. Mr. Panth noted that inflation in the Philippines has become more broad-based due to rising prices in the services sector. Due to the BSP’s policy actions, the IMF expects inflation to start easing back to the 2-4% target range either by end of this year or by early next year. By 2024, the IMF sees Philippine inflation averaging 3.2%, slightly higher than the central bank’s full-year projection of 2.9%.

BSP Governor Felipe M. Medalla hinted that the Monetary Board may keep interest rates on hold at its next meeting if inflation further slows in April. Mr. Medalla also said the BSP may cut borrowing costs this year if inflation continues to ease in the next six months.

Source: bworldonline.com