The International Monetary Fund will revise upward its 2023 growth projection for the Philippines to 5.5 percent from the previous estimate of 5 percent, taking into account the strong numbers posted in the fourth quarter of 2022, a top official said Tuesday.
IMF resident representative to the Philippines Ragnar Gudmundsson said in an economic forum the Philippine economy was on the mend following a deep 9.6-percent contraction in 2020 at the height of the pandemic. The gross domestic product rebounded by 5.7 percent in 2021.
The economy grew by 7.6 percent in 2022 despite the global headwinds highlighted by higher interest rates and elevated inflation. It was the fastest since reaching 8.8 percent in 1976.
Gudmundsson said with COVID cases declining and the economy reopening its borders, private consumption and investments rebounded strongly, backed by the steady increase in private sector credit.
“We think that 2023 [growth] is currently at 5.5 percent. Our previous projection was 5 percent. But with the strong Q4 numbers, we are going to revise our projections upwards,” Gudmundsson said.
He said, however, the confluence of global shocks, coupled with the rising interest rates and elevated inflation, could weigh on the economy in the coming months.
Gudmundsson said over the medium term, the Philippines’ potential growth would rise to 6 percent, reflecting dividends from structural reforms. He said further progress on attracting foreign direct investments and promoting structural change and boosting productivity, including the agricultural sector, could raise potential growth about 6.5 percent and closer to the authorities’ growth objectives.
He warned of the impact of elevated inflation which blew past the target range last year and accelerated to a 14-year high of 8.7 percent in January 2023.
National Economic and Development Authority Secretary Arsenio Balisacan said pent-up demand triggered the economy to perform beyond expectations in 2023 despite the higher consumer prices.
Balisacan said despite the 2022 economic performance that surpassed expectations, the 6 percent to 7 percent target range for this year would likely be maintained.
World Bank country director for the Philippines, Malaysia, Thailand and Brunei Ndiame Diop said monetary policy tightening could impact the growth potential of the economy.
Diop said the GDP growth of 7.6 percent in 2022 was remarkable, considering the uncertain global environment characterized by the continuing global health crisis, higher interest rates and elevated inflation.
“That growth performance was [among] the best in the region.. Going forward… the growth this year may surpass our forecast [of 5.6 percent] as was the case last year…,” Diop said during a panel discussion.
Diop said the World Bank has been revising its global growth projections because of shocks happening around the world. For 2023, he said global growth would be very low, or “one shock away from a recession.”
Diop said a 5.6-percent GDP growth for the Philippines this year could be relatively decent considering the headwinds coming from the external front.
Diop said that “securing a 5.6-percent [GDP growth] is not guaranteed because of the tightening in the policy rate.”
The Monetary Board on February 16 raised interest rates by another 50 basis points to 6 percent to rein in inflation.