The International Monetary Fund (IMF) has reiterated its previously announced growth forecasts for the Philippines for 2024 and 2025 of 5.8 percent and 6.1 percent, respectively, based on the October 2024 World Economic Outlook (WEO) report released on Tuesday, Oct. 22.
The IMF growth forecasts for the Philippines, announced ahead of the WEO last Oct. 3 as part of the IMF Staff completion review, are lower than the government’s official gross domestic product (GDP) growth targets of six percent to seven percent for 2024 and 6.5 percent to 7.5 percent in 2025.
The IMF said the domestic economy “has successfully navigated multiple external headwinds in recent years” and that its growth momentum in 2025 will be supported by “more accommodative financial conditions and investment.”
The Bangko Sentral ng Pilipinas (BSP), with inflation moderating, has started to ease its monetary policy stance since August this year, but the IMF has noted that the “decisive monetary tightening and other measures have helped mitigate inflationary pressures” of the past years.
With inflation and inflation expectations now within the government target range of two percent to four percent, the BSP has cut its policy rates by a combined 50 basis points (bps) in the last two policy meetings.
Based on the WEO, the IMF expects the country’s inflation rate will settle at 3.3 percent this year versus six percent in 2023, and further decline to three percent in 2025.
The IMF said “the global battle against inflation has largely been won, even though price pressures persist in some countries.”
Global inflation, which peaked at 9.4 percent in the latter part of 2022, is expected to reach 3.5 percent by the end of 2025, below the average level of 3.6 percent between 2000 and 2019.
For the global economy, the IMF said that “despite a sharp and synchronized tightening of monetary policy around the world, the global economy has remained unusually resilient throughout the disinflationary process, avoiding a global recession.”
As per the latest WEO, global growth will “hold steady” at 3.2 percent in 2024 and 2025. This was the same forecasts in the past two WEOs , in July and April 2024.
For emerging and developing Asia, the IMF forecasts 5.3 percent growth for 2024 and five percent in 2025. This grouping includes China and India, along with the Philippines, Indonesia, Thailand, Malaysia and Vietnam.
The IMF said emerging Asia’s “strong growth” is projected to subside from 5.7 percent in 2023 to five percent in 2025 due to a sustained slowdown in the region’s two largest countries, China and India.
Meanwhile, IMF Mission Head Elif Arbatli Saxegaard, who was in town in early October for the conclusion of the annual surveillance review, announced ahead of the WEO the growth forecasts for the Philippines.
Saxegaard said the local economy has remained among the best performing economies in the region and that financial conditions and investments will support the growth momentum.
The current account deficit, on other hand, is expected to continue to narrow to two percent and 1.9 percent of GDP in 2024 and 2025 respectively, supported by lower commodity prices, a gradual rise in service exports, and higher remittances.
Saxegaard said downside risks to the outlook come from major economies that could disrupt trade and financial flows, as well as commodity price volatility and supply shocks, and an escalation of geopolitical tensions or regional conflicts.
However, the easing inflation and easing policy stance, followed by a reduction in banks’ reserve requirements are all positives for the economy. She said “the recent tariff cuts on imported rice and other non-monetary measures to reduce food prices should further ease headline inflation by year-end.”