The International Monetary Fund (IMF) has lowered its economic growth forecast for the Philippines due to unfavorable global economic condition.

Cheng Hoon Lim, IMF mission head said the country’s economy, as measured by its gross domestic product (GDP), is seen to grow by 6.5 percent this year, weaker than the previous forecast of 6.7 percent in July.

“Projections have been revised downward and that's mainly the global economy,” Lim said in a briefing on Monday, Sept. 26. “The IMF has had successive downgrades of global growth, including China and the US, and Philippines is not isolated from the rest of the world.”

Lim said the country will be affected by the slowdown in the US and China because these two nations are major trading partners of the Philippines.

“And that's the main reason why we revised our growth projections to six and a half percent this year,” she said.

IMF’s economic growth outlook, however, settles at the lower-end of the government’s target range of 6.5 percent to 7.5 percent for the year.

Meanwhile, the IMF retained its GDP forecast at five percent for next year, but this is slower compared with President Marcos’ target band of 6.5 percent to 8.0 percent.

"The Philippines has successfully emerged from one of the world's strictest pandemic lockdowns, thanks to sustained reforms and disciplined macroeconomic policies that contained financial vulnerabilities and mitigated the hardships faced by the poor,” Lim said.

Along with slower growth, Lim also said that inflation is seen to accelerate this year at 5.3 percent, well above the government’s target of 2.0 percent to 4.0 percent.

Lim said the outlook for the Philippines is subject to significant downside risks, where policy tradeoffs between output and inflation would become more acute.

The downside risks cited by the IMF include a surge in Covid-19 cases from more severe variants, a more abrupt or larger-than-expected tightening of global financial conditions, a deepening of the global slowdown, persistently high domestic inflation, and natural disasters.

On the upside, she cited an end to Russia's war in Ukraine and taming of inflation both domestically and globally could lay the foundations for stronger growth than currently envisaged.”

“Looking ahead, sustaining the economy recovery will require a focus on policies to address inflationary risks, increase fiscal and financial resilience to adverse shocks, and successful implementation of reforms to mitigate pandemic scarring and raise productivity growth,”
Lim said.