Philippine economic growth is expected to again be one of the highest in the region with the International Monetary Fund (IMF) having raised its forecasts for this year and the next.
In its latest World Economic Outlook (WEO), the IMF forecast 6.2-percent gross domestic product (GDP) growth for both 2024 and 2025, up from 6.0 percent and 6.1 percent, respectively.
The change for 2024 falls within the government's downwardly revised 6.0- to 7.0-percent target, while the 2025 projection is short of the official 6.5- to 7.5-percent goal.
Gross domestic product (GDP) growth averaged 5.5 percent in 2023, below the 6.0- to 7.0-percent target and markedly slower than 2022's 7.6 percent, as stubborn inflation and high interest rates dampened consumption.
It was still one of the highest in Asia, exceeded only by Macau's 80.6 percent and India's 7.6 percent.
The revised 2024 and 2025 forecasts for the Philippines are also among the highest for the region, again only topped by India (6.8 percent) and Macao (13.9 percent) for this year and by India (6.5 percent), Macao (9.6 percent) and Vietnam (6.5 percent) next year.
Philippine growth is also expected to outperform Asia's 4.5 percent (2024) and 4.3 percent (2025), emerging and developing Asia's 5.2 percent and 4.9 percent, the Asean-5's 4.5 percent and 4.6 percent, and emerging Asia's 5.2 percent and 4.8 percent, respectively.
A 2024 rebound is widely expected but headwinds such as tensions in the Middle East and inflation risks recently prompted the government to temper its expectations and macroeconomic assumptions.
Ragnar Gudmundsson, IMF resident representative, said "real GDP growth for 2024 was revised slightly, reflecting carryover from a better-than-expected outturn in the last quarter of 2023."
Growth next year, meanwhile, will be "supported by an acceleration in domestic demand and investment."
Gudmundsson said that structural reforms to address infrastructure and education deficiencies, attract more foreign direct investments (FDI), and leverage opportunities in the digital economy should support growth of approximately 6.0-6.5 percent.
"These reforms should be complemented by strengthening existing social protection schemes and addressing climate change through a more integrated strategy that includes a carbon pricing scheme," he added.
Inflation, meanwhile, is expected to end the year at 3.6 percent, within the 2.0- to 4.0-percent target, and further decline to 3.0 percent in 2025.
Gudmundsson said the rate, which edged up to 3.7 percent in March and is widely expected to breach target in the second quarter, would gradually approach 3.0 percent in the second half of this year.
However, "risks remain tilted to the upside as a surge in food or fuel prices could lead to increased pressure for greater wage hikes and persistence in core inflation."
"The BSP should maintain a sufficiently restrictive monetary policy stance until inflation fully returns to target," Gudmundssion said.
"Scope for a gradual reduction in the policy rate could emerge later this year provided that inflation expectations are firmly anchored and upside risks to the inflation outlook do not materialize," he added.
The BSP's policymaking Monetary Board has held fire for four straight meetings, leaving the benchmark rate at a near 17-year high of 6.5 percent.
Central bank Governor Eli Remolona Jr. has said that rate cuts — originally expected by analysts to start as early as June — could be delayed well into the year or possibly the first quarter of 2025 given inflation and growth risks.
As for the jobs situation, the IMF said that unemployment could worsen to 5.1 percent this year and 5.2 percent in 2025, from 4.3 percent in 2023.
"Even though the most recent indicators have been encouraging, special attention needs to be paid to the agricultural sector that may be negatively affected by the El Niño phenomenon and adverse weather conditions this year," Gudmundsson said.
Also, while the demand for workers in the construction sector may be supported by the acceleration of infrastructure projects, he said that the passage of legislation that would contribute to upskilling was still needed.
Source: Manila Times