The International Monetary Fund (IMF) has slashed its 2021 growth forecast for the Philippines to 3.2 percent—below the government’s target—as high inflation and the highest unemployment rate in the region would linger for the rest of the year.
The Washington-based multilateral lender’s World Economic Outlook (WEO) report for October 2021 released on Tuesday showed a further drop in the gross domestic product (GDP) growth estimate for this year, from 5.4 percent previously.
The updated projection was also lower than the already downgraded 4 to 5 percent goal set by President Duterte’s economic managers when the more infectious Delta strain of COVID-19 reached the country.
As of press time, IMF resident representative for the Philippines Yongzheng Yang had yet to respond to request for comment, as the report embargo was lifted during a holiday in the United States, where he’s currently based.
Back in July, Yang said that “the Delta variant of the coronavirus is a concern and we are monitoring its potential impact on the economy.”
World Economic Outlook Data - Philippines 2019 - 2026
Also, Yang had said that “timely implementation of fiscal support—with flexibility to address evolving priorities—is crucial for continued recovery.”
“The fiscal deficit targeted in the 2021 budget provides significant stimulus to economic activity, but given the imperative to beat the virus and the continued difficulties faced by vulnerable families and businesses, more resources could be needed. Such resources should aim to bolster the health-care system to accelerate vaccinations, strengthen capacity for testing, tracing, isolation, and treatment, and support affected families and businesses,” Yang had said.
But the economic team wanted to keep the 2021 budget deficit at an already record-high P1.86 trillion, equivalent to 9.3 percent of GDP. The government had set aside P4.74 trillion in expenditures this year to fight the health and socioeconomic crises inflicted by the prolonged pandemic.
The IMF projected the Philippines’ GDP growth in 2022 at 6.3 percent, also below the government’s 7 to 9 percent target range.
It forecasted headline inflation this year to rise to an average of 4.3 percent, above the Bangko Sentral ng Pilipinas’ 2 to 4 percent target band of a manageable rate of increase in prices of basic commodities.
In Asia, the Philippines’ inflation rate in 2021 was poised to be the second highest, next only to India, making private-sector economists worry that consumption—a prime mover of the economy—would take a hit from expensive goods and services, especially food items, amid hopes for an economic rebound starting this year.
Next year, the IMF expects inflation to ease to a within-target 3 percent.
The unemployment rate in the Philippines was expected to remain elevated in 2021 to end the year at 7.8 percent—the highest in Asia, just like last year’s 10.4 percent.
In 2022, the jobless rate would go down to 6.8 percent, but it remained the worst among the Asian countries covered by the latest IMF WEO report.