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IMF cuts Philippine progress outlook



By Luisa Maria Jacinta C. Jocson, Reporter

THE INTERNATIONAL Financial Fund (IMF) trimmed the Philippines’ progress outlook for this yr, after a slower-than-expected first-quarter enlargement.

The IMF now sees Philippine gross home product (GDP) increasing by 6% this yr, decrease than its 6.2% forecast in its World Financial Outlook (WEO) in April.

Its revised forecast continues to be throughout the authorities’s 6-7% goal this yr.

“Development is predicted to rebound to six% in 2024 and 6.2% in 2025, on the again of stronger consumption demand, greater private and non-private funding and a restoration in exports,” IMF Mission Chief Elif Arbatli Saxegaard mentioned at a press briefing on Monday.

She mentioned the expansion forecast was lowered after weaker-than-expected GDP knowledge.

“The 2023 (GDP progress) was revised down barely from 5.6% to five.5%… We acquired new knowledge on the primary quarter, which was barely decrease than what we had anticipated. So, it’s reflecting a small downward adjustment, reflecting the outturn because the April WEO,” she mentioned.

The financial system grew by 5.7% within the first quarter from 6.4% a yr in the past and 5.5% within the fourth quarter.

Regardless of the decrease forecast, Ms. Saxegaard mentioned the Philippine financial system “continues to carry out nicely regardless of exterior challenges and coverage tightening.”

She mentioned progress can be pushed by the federal government’s initiatives to enhance ease of doing enterprise and entice international direct investments, which might “increase the financial system’s long-term progress potential.”

Nonetheless, she mentioned draw back dangers to the outlook embody geoeconomic fragmentation, elevated rates of interest and climate-related shocks.

The IMF retained its 6.2% GDP progress forecast for 2025, which might be primarily pushed by easing inflation and a pickup in family consumption and investments.

LOWER INFLATION
In the meantime, the IMF mentioned it sees Philippine inflation settling at 3.4% this yr, decrease than its earlier forecast of three.6%.

That is additionally under the Bangko Sentral ng Pilipinas’ (BSP) full-year inflation expectation of three.5%.

“That displays our view that within the second half, meals worth inflation will come down quicker because of the just lately introduced decrease import tariffs on rice,” Ms. Saxegaard mentioned.

Final week, the Nationwide Financial and Improvement Authority Board accredited a discount in rice import tariffs to fifteen% from 35%. That is a part of a medium-term plan to decrease tariffs on agricultural and industrial merchandise till 2028.

The tariff reduce might deliver down the retail worth of rice by P6 to P7 per kilo as early as July, based on the Agriculture division.

“Whereas greater costs of meals have just lately led to an uptick, inflation is projected to say no in the direction of the goal of three% within the second half of the yr,” Ms. Saxegaard mentioned.

Nonetheless, IMF mentioned that dangers to the inflation outlook stay on the upside attributable to geopolitical tensions and commodity worth volatilities.

‘SUFFICIENTLY RESTRICTIVE’
Ms. Saxegaard mentioned the BSP ought to keep a “sufficiently restrictive” coverage stance to tame inflation.

As soon as inflation settles firmly throughout the 2-4% goal, this is able to be the suitable time for the central financial institution to start easing, she added.

“That opens up house for the BSP to barely loosen or regularly scale back its coverage charges (and) would nonetheless keep its coverage stance restrictive sufficient to anchor inflation expectations,” she mentioned.

“We’d anticipate, even when the BSP lowered its coverage fee over the medium time period, actual rates of interest would proceed to stay sufficiently tight to influence inflation,” she added.

Ms. Saxegaard mentioned the IMF expects the central financial institution to ease financial coverage in “the close to and over the medium time period.”

The BSP can presumably begin its easing cycle in August, Governor Eli M. Remolona, Jr. earlier mentioned.

The Financial Board stored its benchmark fee regular at a 17-year excessive of 6.5% for a fifth straight assembly in Might.

From Might 2022 to October 2023, the central financial institution raised borrowing prices by 450 foundation factors.

The IMF is getting ready for its Article IV Session, which is about at end-September.

Beneath the IMF’s Articles of Settlement, the Fund holds annual bilateral discussions with its members. Representatives from the IMF will go to the nation to evaluate financial and monetary developments and maintain conferences with authorities and central financial institution officers.

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