IMF keeps 6% Philippine growth forecast this year
By Lee C. Chipongian
The International Monetary Fund (IMF) has not changed its six percent growth projection for the Philippines this year as well as the 6.2 percent forecast for 2025, based on the July 2024 World Economic Outlook (WEO) Update released Tuesday, July 16.
The IMF’s 2024 and 2025 growth forecasts for the Philippines is the second fastest growth estimates the IMF has given to an economy in its list of selected economies in the latest WEO that includes non-Asian countries such as the US, United Kingdom, France and Germany.
In this WEO update, India has the fastest growth projection for 2024 at seven percent and 6.5 percent in 2025. After the Philippines, the IMF expects China and Indonesia to grow by five percent each this year, and 4.5 percent and five percent, respectively, in 2025.
The economy with the fourth highest growth estimate for 2024 is Malaysia with 4.4 percent and Turkiye with 3.6 percent. Next year, the IMF projects Malaysia to maintain its 4.4 percent growth while Turkiye’s growth is estimated to ease to 2.7 percent.
Among ASEAN countries in the selected list of economies, the Philippines is at the top in terms of growth estimates, followed by Indonesia; Malaysia; and Thailand with 2.9 percent.
The IMF expects ASEAN 5 will grow by five percent this year and 4.6 percent in 2025. This is a faster pace of growth compared to the global growth of 3.2 percent for 2024 and 3.3 percent next year.
According to the IMF, “global growth is projected to be in line with the April 2024 (WEO) … however, varied momentum in activity at the turn of the year has somewhat narrowed the output divergence across economies as cyclical factors wane and activity becomes better aligned with its potential.”
It noted that services price inflation “is holding up progress on disinflation, which is complicating monetary policy normalization” while “upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates, in the context of escalating trade tensions and increased policy uncertainty.”
“To manage these risks and preserve growth, the policy mix should be sequenced carefully to achieve price stability and replenish diminished buffers,” said the IMF.
Last June, the IMF has downgraded its growth forecast for the Philippines from 6.2 percent to six percent for 2024 on account of the lower first quarter output growth.
IMF Mission Head Elif Arbatli Saxegaard, who was in town in June for the annual surveillance review, said the local economy is on a strong growth path despite “external challenges and policy tightening”.
The country’s gross domestic product (GDP) grew by 5.5 percent in 2023 and to a below-target of 5.9 percent in the first quarter. The government GDP target is six percent to seven percent for 2024 and 6.5 percent to 7.5 percent in 2025.
Saxegaard noted that downside risks to the outlook “stem from geoeconomic fragmentation, high interest rates, and climate-related shocks” while efforts “to attract foreign direct investment, promote business-friendly reforms, and enhance competitiveness could raise the economy's long-term growth potential.”
Meanwhile, the IMF said the Bangko Sentral ng Pilipinas (BSP) has adequately addressed inflationary pressures by keeping the key interest rate appropriate at 6.5 percent which resulted after a cumulative 450 basis points increase since May 2022.
Saxegaard said inflation is expected to moderate to three percent in the second half of 2024 with persistent upside risks to inflation from geopolitical tensions and commodity price volatility.