A woman fixes the display of Chinese lanterns at a mall in Manila. — PHILIPPINE STAR/EDD GUMBAN

THE INTERNATIONAL Monetary Fund (IMF) kept its growth projection of 5% for the Philippines this year, even as it slashed the forecast for the ASEAN-5 grouping amid a looming global economic slowdown.

“Our projections, which pre-date the release of the fourth quarter 2022 GDP estimates, point to (Philippine) growth slowing down to 5% in 2023 due to a tighter policy stance and the confluence of global shocks, including spillovers from the war in Ukraine and tighter global financial conditions,” IMF Representative to the Philippines Ragnar Gudmundsson said in an e-mail.

The IMF’s forecast is lower than the 6-7% gross domestic product (GDP) growth target set by the government this year. It is also slower than the 7.6% GDP expansion in 2022, which was the best economic performance in over four decades.

IMF GDP forecasts for select Asia-Pacific economies

For 2024, the IMF sees the Philippines expanding by 6% “as the global economy bottoms out” and the government accelerates structural reforms, including infrastructure and agricultural development.

“Potential growth could be boosted by further efforts to raise productivity, reduce infrastructure and education gaps, strengthening existing social protection schemes, and harnessing benefits from the digital economy,” Mr. Gudmundsson said.

In its World Economic Outlook update released on Tuesday, the IMF said the world economy will likely expand by 2.9% this year, slower than the 3.4% expansion in 2022, amid the global fight against inflation and Russia’s war in Ukraine. Global growth will rebound to 3.1% in 2024, it said. (Related story on S1/9, “IMF upgrades global growth forecast”)

The multilateral lender trimmed the 2023 forecast for ASEAN-5 to 4.3% from 4.5% in the October forecast. For next year, it also cut the ASEAN-5 forecast by 0.2 percentage point to 4.7%.

ASEAN-5, comprised of the Philippines, Singapore, Malaysia, Vietnam, and Indonesia, is estimated to have expanded 5.2% in 2022.

Mr. Gudmundsson noted the Philippines’ growth for 2023 will still be higher than the ASEAN-5 forecast.

At a media briefing on Tuesday, IMF Division Chief Daniel Leigh said there would be a moderation of the region’s strong growth last year due to the policy tightening of central banks. 

“Because of the increase in inflation in the region, central banks have stepped up and raised interest rates. There is a downgrade in 2023 partly because of that tightening in monetary policy,” Mr. Leigh said.

However, he said the region is expected to recover in 2024, thanks to a stronger growth outlook globally, including China.

Mr. Leigh said ASEAN-5 economies would benefit from the likely faster growth in China next year.

Philippine inflation is expected to ease this year, after price growth accelerated to 5.8% in 2022.

“We project inflation to decline modestly to 4.7% in 2023, supported by some moderation in commodity prices and the tighter monetary policy stance, and to converge to the midpoint of the BSP’s target band in 2024,” Mr. Gudmundsson said.

The Bangko Sentral ng Pilipinas (BSP) sees headline inflation averaging 4.5% this year, higher than the 2-4% target range, before easing to 2.8% in 2024.

“In the near term, continued tightening of monetary policy is appropriate to keep inflation expectations anchored and reduce headline inflation securely within the 2-4% range,” he said.

Last year, the BSP hiked its benchmark interest rate by 350 bps, bringing it to a 14-year high of 5.5% to tame inflation.

BSP Governor Felipe M. Medalla earlier signaled more policy rate increases in the first quarter this year. The Monetary Board will have its first policy review on Feb. 16. — K.B.Ta-asan