The country's growth prospects for this year and the next "remain intact" based on Bangko Sentral ng Pilipinas (BSP) estimates.
Gross domestic product (GDP) growth is expected to "remain robust" in the first half of 2024, decelerate for the rest of the year and then pick up in 2025, highlights of last month's Monetary Board policy meeting showed.
"This outlook is consistent with the expected shift to a slightly negative output gap in 2024 to 2025, suggesting that the growth momentum of the economy remains firm and that a hard landing appears to be unlikely," the report states.
Monetary authorities decided to keep interest rates steady last April 8, noting that inflation is still expected to remain within target for 2024 to 2026 despite upside risks.
"[L]atest demand indicators suggested that domestic growth prospects over the medium term remained largely intact, even as overall economic activity continues to gradually respond to tighter financial conditions," the report also states.
Surging inflation prompted the Monetary Board to raise key interest rates by a total of 450 basis points beginning May 2022. The BSP's benchmark rate currently stands at 6.5 percent, the highest since 2007.
Stubborn inflation and high borrowing costs weighed on last year's GDP growth, which at 5.6 percent was significantly lower than 2022's 7.6 percent and also fell short of the 6.0- to 7.0-percent target.
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A rebound is expected this year but mounting headwinds have prompted economic managers to trim the 2024 goal to a "more realistic" 6.0 to 7.0 percent from 6.5 to 7.5 percent.
Inflation finally returned to the 2.0- to 4.0-percent target last December and has stayed within the range since the start of 2024. The BSP expects the rate to top 4.0 percent sometime in the second quarter but then fall back over the rest of the year.
The mean inflation forecast for 2024 remains at within-target 3.9 percent based on a March poll of external forecasters, the report states.
The median forecasts for 2025 and 2026, meanwhile, rose to 3.6 percent from 3.5 percent and 3.4 percent, respectively.
For 2024, the median forecast was unchanged at 3.8 percent but rose to 3.4 percent for 2025 and 3.3 percent for 2026 from 3.3 percent and 3.1 percent, respectively.
April's inflation print was a lower-than-expected 3.8 percent while preliminary first-quarter GDP data will be released this Thursday. The data will be considered by the Monetary Board when it again meets to discuss policy next week.
Source: Business World