By Keisha B. Ta-asan, Reporter
WASHINGTON — Global finance officials and central bankers gathered here on Monday for the start of the spring meetings of the World Bank (WB) and International Monetary Fund (IMF) amid a worsening economic outlook, geopolitical tensions and elevated inflation.
Finance Secretary Benjamin E. Diokno and Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla are scheduled to attend the WB-IMF meetings.
The Philippine economic team, which includes Budget Secretary Amenah F. Pangandaman and National Economic and Development Authority Secretary Arsenio M. Balisacan, will also hold an economic briefing on April 12 (US time) for about 180 senior executives and representatives of major US companies and industry groups.
“The message is one of optimism: how the Philippines has transformed itself into one of the fastest-growing economies in the fastest-growing region in the world,” Mr. Diokno said in a Viber message to reporters.
At the economic briefing, Philippine officials are planning to unveil business opportunities for foreign investors in the Philippines and highlight the country’s “strong economic story.”
Last year, Philippine gross domestic product (GDP) expanded by 7.6%, the highest in 46 years. The government expects growth to slow to 6-7% this year, reflecting the gloomy global outlook.
However, the IMF now expects global economic growth to slip below 3% this year, and remain around 3% in the next five years.
IMF Managing Director Kristalina Georgieva last week warned its global economic growth outlook over the next five years is the lowest since 1990.
“Despite surprisingly resilient labor markets and strong consumer demand, despite the uplift in China, we expect the world economy to grow less than 3% this year,” she said in a speech.
She said global growth remains weak both in the near and medium terms, but Asia remains a bright spot. India and China are likely to make up half of global growth this year, she added.
“For low-income countries, higher borrowing costs come at a time of weakening demand for their exports. And we see their per-capita income growth staying below that of emerging economies. That is a severe blow, making it even harder for low-income nations to catch up,” Ms. Georgieva said.
To brighten growth prospects, Ms. Georgieva said there is a need to fight inflation and safeguard financial stability.
“Fighting inflation has become more complex with the recent banking sector pressures in the United States and Switzerland, serving as a reminder of how difficult it is to transition from a period of low-interest rates and ample liquidity to high interest rates and scarce liquidity,” she said.
Ms. Georgieva noted that as long as financial pressures remain limited, central banks are expected to stay the course in the fight against inflation by “holding a tight stance to prevent a de-anchoring of inflation expectations.”
In the Philippines, headline inflation slowed for the second straight month in March to 7.6% from 8.6% in February. However, core inflation, which discounts volatile items like food and fuel, quickened to a fresh 22-year high of 8% in March from 7.8% a month earlier.
To tame inflation, the Philippine central bank has raised borrowing costs by 425 basis points since May last year. This brought the benchmark policy rate to a near 16-year high of 6.25%.
Ms. Georgieva said central banks should address risks to financial stability whenever they emerge by carefully monitoring risks in banks and nonbank financial institutions, as well as weaknesses in sectors such as commercial real estate.
“In other words, central banks should continue to use interest rates to fight inflation while using financial policies to ensure financial stability. This is the right course of action, so long as financial pressures remain limited,” she said.
“If that were to change, policy makers would face an even more complicated task, with difficult trade-offs between their inflation and financial stability objectives, and the use of their respective tools. That’s why they need to be more vigilant and more agile than ever.”
The IMF is scheduled to release the latest World Economic Outlook this week.
In its World Economic Outlook update in January, the IMF said the world economy would likely expand by 2.9% this year, slower than 3.4% in 2022.
The IMF sees Philippine economic growth slowing to 5% this year from last year’s 7.6% amid a tighter policy stance and elevated inflation. For 2024, the IMF expects the Philippines to grow by 6%.