THE INTERNATIONAL Monetary
The prediction for the Philippines’ economic outlook this year suggests that a “higher for longer policy rate” may be necessary to tackle any potential issues.persistent inflation.
The international organization decreased its forecast for the Philippines’ gross domestic product (GDP) growth to 5.3% from the previous estimate of 6.2% in July.
This is well below the government’s 6-7% goal, and signifi
The growth rate in 2023 is significantly lower than the 7.6% increase in 2022.
fluence of challenges, including high inflation, a resurgence of COVID-19 cases, and natural disasters”
The economy of the Philippines has recovered significantly from the pandemic, but is now facing a combination of difficulties such as elevated inflation, a spike in COVID-19 cases, and frequent natural disasters.fl
The International Monetary Fund’s Mission Chief to the Philippines, Shanaka Jayanath Peiris, stated during a press briefing that the country may experience the effects of global disturbances.fi
The Article IV consultation mission concluded on Tuesday.
The speaker stated that the projected Philippine GDP for the current year has been decreased as the growth in the second quarter was only 4.3%, which can be attributed to the struggling global economy and stricter policy measures.
2nd quarter, GDP grew at a slower pace than it has in the past 2 years.
The economic growth in the second quarter was the most sluggish it has been in more than two years. In the second quarter, there was a slower rate of increase in GDP compared to the previous two years.fi
In the first half, the average GDP growth was 5.3%.
The International Monetary Fund (IMF) announced an increase in its growth projection for the Philippines in 2024, from 5.5% to 6%. This is due to the expected increase in public spending and higher demand for Philippine exports from external sources.
However, this falls significantly short of the government’s goal of achieving 6.5-8% GDP growth in the upcoming year.
Mr. Peiris stated that the main concerns for the future include ongoing high levels of global and domestic inflation, which may require further adjustments to monetary policies, a sudden decrease in global economic growth that could impact the export of goods and services, increased tensions in geopolitical relationships, and potential depreciation of currency due to capital leaving under unstable market conditions.
‘HIGHER FOR LONGER’
The IMF predictsfl
According to Mr. Peiris, the inflation rate is expected to increase to approximately 6% this year and then decrease to 3.5% by 2024.
The projected inflation rate for 2023 is expected to be greater than the BSP’s estimated full-year rate of 5.8%. The BSP predicts that inflation will reach 3.5% in the coming year.
the World Economic Outlook update that growth in advanced economies will slow from 2.3% to 1.9%
The International Monetary Fund predicts in its latest World Economic Outlook update that there will be a decrease in growth from 2.3% to 1.9% in advanced economies.fl
The goal is to reach the 2-4% target by the beginning of next year.
“Mr. Peiris stated that the ECTS system would be used.”
Therefore, it is necessary to have a higher policy rate for an extended period of time until inflation is firmly within the desired range. This should be accompanied by a tightening bias to help stabilize expectations of future inflation.
The BSP increased borrowing rates by 425 basis points between May 2022 and March 2023, resulting in a benchmark interest rate of 6.25%, the highest it has been in almost 16 years. The Monetary Board has currently halted their tightening measures.
The International Monetary Fund (IMF) predicts that the current account deficit will decrease to -3% of Gross Domestic Product (GDP) in 2023 and -2.6% in 2024, down from -4.5% in 2022.
The BSP predicts that the current account deficit will reach $11.1 billion, equivalent to -2.5% of GDP, in the current year.
According to Mr. Peiris, the current account deficit will be aided by reduced commodity prices, an increase in electronic exports, and a boost in service exports.
According to him, the banking industry in the Philippines continues to have strong capital and liquidity, although there is a potential risk due to increased interest rates.
implementing macroprfi-financial sectors
Improving financial oversight, broadening the range of tools for monitoring systemic risks, and adjusting them to address potential weaknesses resulting from interconnections between financial groups and non-financial industries.financial corporates,” Mr. Peiris said.
The International Monetary Fund also advised the Philippines to increase efforts in e-commerce.ff
Efforts to combat money laundering and terrorism.fi
Improving financial practices in order to be taken off the Financial Action Task Force’s “gray list.”
The Philippines has been added to the gray list of countries being closely monitored by the global “dirty money” watchdog since June 2021.
The process of the government reducing its budget deficit and controlling spending.word
The plan is proceeding as planned.fl
Achieving robust financial results and reducing current expenditures.
He also observed that the government’s efforts to consolidate are “suitable” for decreasing the debt-to-GDP ratio to less than 60% by 2025.
At the end of June, the ratio of government debt to GDP was 61%, slightly higher than the 60% limit deemed manageable for developing economies by multilateral lenders.
According to Mr. Peiris, the government still has the option to increase measures that generate revenue.
He suggested a more ambitious plan to increase revenue which could fund additional social spending and help reduce poverty. This strategy could also aid in responding to natural disasters while maintaining the current deficit level.
Mr. Peiris noted that key reforms such as the military and uniformed personnel (MUP) pension system reform and the budget modernization bill are “critical and should be complemented by ongoing efforts to strengthen the oversight of government-owned and -controlled corporations.”
“The renewed emphasis on financing the country’s infrastructure gaps through public-private partnerships (PPPs) is well placed and the new PPP Code is welcome in this regard. The reform of the mining fiscal regime and Mining Act provides an opportunity to enact a progressive and unified tax system, and a competitive investment regime,” he added. — Keisha B. Ta-asan