The International Monetary Fund (IMF) remains optimistic on the 2024 Philippine growth prospects despite a slight slowdown in 2023 amid the continuing global headwinds marked by higher inflation and interest rates, exacerbated by the ongoing conflict in the Middle East.
IMF division chief of regional studies at Asia and Pacific Department Jay Peiris cited the local monetary authorities’ alertness in raising interest rates when necessary to rein in inflation.
“This year, we’re expecting a [growth] slowdown to 5.3 [percent], but go back to 6 percent next year. This year’s growth is a bit weaker for many factors, including kind of initially underspending in the government, of course, the impact of monetary tightening and the weak external global environment, which is a very similar story to many ASEAN countries,” Peiris said.
The IMF earlier cut its growth forecast for the Philippines this year to 5.3 percent from the previous estimate of 6.2 percent. It raised the 2024 growth outlook to 6 percent from 5.5 percent.
Peiris said a pickup in growth was expected next year because service exports were doing quite well. He said the turn of the “tech cycle” would boost electronic exports next year. He also mentioned the acceleration of public spending.
“So in that sense, the strong macro—BSP [Bangko Sentral ng Pilipinas] acted very decisively in raising rates when inflation went up. Fiscal consolidation is on track, supporting monetary policy. So prudent macro policy in the Philippines has been one hallmark of the good economic performance,” Peiris said.
Peiris also said that the opening up of the economy to foreign investment has been an important aspect for growth.
“FDI has picked up. Right now, globally, FDI is weak, but opening up to FDI greater investment, the prudent macro policies, and also the fiscal focusing more on infrastructure, 5 percent of GDP in public investment and PPPs [public private partnership], is one reason I think Philippines has done well, and that hopefully all is well going forward,” Peiris said.
The interagency Development Budget Coordinating Committee earlier projected a 6 percent to 7 percent growth for 2023, but elevated inflation, higher interest rates and underspending weighed on the economy which grew by 5.3 percent in the first half, below the target range.
Economic managers said GDP should grow by at least 6.6 percent in the second half to meet the low end of the target range. They said a more robust spending would do the trick for the rest of the year.