The World Bank has lowered this year’s economic growth forecast for the Philippines as inflation continued to run far above the government’s target range. In its latest East Asia and the Pacific Economic Update report, the Washington-based multilateral institute slashed its gross domestic product (GDP) outlook for the country to 5.6 percent from 5.8 percent in October 2022. World Bank’s latest GDP forecast is below the Marcos administration’s target band of 6.0 percent to 7.0 percent. The growth outlook is also slower than Vietnam’s 6.3 percent, but faster than China (5.1 percent), Indonesia (4.9 percent), Malaysia (4.3 percent), Thailand (3.6 percent), Cambodia (5.2 percent), and Myanmar (3.0 percent). World Bank noted that the Philippine inflation was not showing signs of having peaked in recent months unlike in other countries. “While they have moderated somewhat in several countries reflecting the decline in commodity prices, food prices have risen in recent months in the Philippines, Thailand, and Vietnam,” the report said. In particular, World Bank cited that the higher oil price environment would negatively affect growth in oil importing economies such as the Philippines. The country is currently facing a multi-year high inflation. While the rate of increase in consumer prices eased slightly from 8.7 percent in January to 8.6 percent in February, this remained well-above the government’s target of 2.0 percent to 4.0 percent. Last March 22, National Economic and Development Authority Secretary Arsenio M. Balisacan said inflation, which fueled the aggressive monetary policy tightening by the Bangko Sentral ng Pilipinas (BSP), would drag down the country’s economic growth this year. Balisacan explained that the effects of central bank policy rate hikes are expected to weigh in on consumer and investment appetite later this year. In February, the BSP raised anew overnight borrowing rate by 50 basis points to six percent, bringing cumulative hikes to 400 basis points since May last year. “Given the lagged effect of monetary tightening, this policy response will likely slow down consumption and investment as consumers and investors hold off on their spending and plans to expand in the coming months,” Balisacan said. The economy remains driven by consumption contributing nearly four-fifths of GDP growth, while services pitched in close to three-fourths of the expansion.