The International Monetary Fund (IMF) expects the Philippine economy to grow 5.3 percent in 2023, 6.0 percent in 2024 and 6.1 percent in 2025.
These forecasts were based on the IMF executive board’s conclusion of the 2023 Article IV consultation with the Philippines.
It noted that the Philippines’ growth momentum started to moderate after a strong post-pandemic recovery. Growth moderated from 7.6 percent in 2022 to 4.3 percent in the second quarter of 2023, largely due to external headwinds, fiscal underspending and normalization of pent-up demand.
“Growth is expected to bottom out in 2023. Real GDP growth is expected to bounce back in the second half of 2023 and reach 6.0 percent in 2024, supported by an acceleration in public investment and improved external demand for the Philippines’ exports,” it said.
The government’s infrastructure program, opening up of sectors to greater foreign investment, and private sector participation through PPP modalities will gradually crowd in private investment and help realize a growth potential of about 6 to 6.5 percent over the medium term, it said.
The IMF expects inflation to gradually approach the target in early 2024, though recurrent supply shocks cloud the disinflation trajectory.
The current account deficit is expected to continue to narrow in 2024. Risks to the growth outlook are tilted to the downside, mainly stemming from persistently high inflation, globally and locally, and a highly uncertain global economic and geopolitical environment, it said.
Upside risks to the inflation outlook include higher commodity prices and potential second-round effects.
The IMF directors agreed that monetary policy was tightened appropriately to anchor inflation expectations. They emphasized the need to maintain a restrictive policy stance until inflation fully returns to target and to remain ready to tighten further should upside risks to inflation materialize.
“While allowing the exchange rate to continue to absorb shocks remains crucial, temporary foreign exchange interventions under limited circumstances may be considered to ensure orderly market conditions and address risks to price stability. Directors also noted the importance of strengthening coordination between the central bank and the Bureau of the Treasury to further develop the benchmark yield curve,” it said.
The IMF said the Philippine banking sector is well-capitalized and liquid. Noting potential pockets of vulnerabilities, they agreed that banks’ exposure to commercial real estate and leveraged corporates warrants close monitoring.