Economic growth in the Philippines is expected to soften to 5 percent in 2023 from the actual expansion of 7.6 percent in 2022 amid global headwinds, the International Monetary Fund said in its World Economic Outlook Tuesday.
It predicted that the country’s gross domestic product growth would pick up to 6.0 percent in 2024, although still below the government’s medium-term growth target range of 6.5 percent to 8.0 percent.
“Global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024,” the IMF said.
The IMF said the rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity.
Its growth forecasts for the Philippines are faster than the average of 4.3 percent for ASEAN 5 in 2023 and 4.7 percent in 2024. ASEAN-5 refers to Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Growth in emerging and developing Asia is expected to rise in 2023 and 2024 to 5.3 percent and 5.2 percent, respectively, after the deeper-than-expected slowdown in 2022 to 4.3 percent, attributable to China’s economy.
Growth in China is projected to rise to 5.2 percent in 2023, reflecting rapidly improving mobility, and to fall to 4.5 percent in 2024 before settling at below 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms, the IMF said.
Meanwhile, Standard Chartered Bank said GDP growth in the Philippines was expected to moderate to 5.3 percent from the 46-year high of 7.6 percent in 2022 because of elevated inflation that would impact consumer spending.
Standard Chartered economist for Asia Jonathan Koh said growth in the Philippines would pick up to 6 percent in 2024.
“I do see that there are headwinds [affecting the economy], such as [high] inflation that will dampen [the] purchasing power [of Filipinos]… This will affect consumer spending,” Koh said in an online presentation.
The Philippine economy gained mainly from the strength of the industry and services sectors last year. The growth was the fastest since 8.8 percent in 1976.
It was also the fastest among Asian economies that have so far released their 2022 GDP data, followed by Vietnam’s 5.9 percent and China’s 2.9 percent.
Koh said higher food prices would remain a key concern for monetary authorities. He said the Bangko Sentral ng Pilipinas might hike the policy rate by another 50 basis points to 6 percent in the first quarter of 2023 and pause after that.
Koh said the BSP might cut the interest rates starting the fourth quarter of 2023.
“Even though GDP is very strong in 2022 [at 7.6 percent], growth will moderate this year… I do expect inflation to moderate below 4 percent by the end of the third quarter [and] I don’t see the BSP keeping the policy rate,” Koh said.