High inflation clouds Philippine growth outlook in 2023, IMF says

The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S. REUTERS/Yuri Gripas/File photo

MANILA  -The Philippine economy is on track to expand this year, but probably at a slower clip, as stubbornly high inflation may warrant a “higher-for-longer policy rate path,” the International Monetary Fund (IMF) said on Tuesday.

The Fund said it cut its growth forecast for the Philippines to 5.3 percent from a July estimate of 6.2 percent, following a slowdown in second quarter growth, while inflation is expected to stay elevated, hurting consumer demand.

READ: PH GDP growth slowed to 4.3% in Q2 2023

For the year, the IMF expects Philippine inflation to average close to 6 percent, before easing to close to 3.5 percent in 2024, which would probably require the central bank to hold on to higher interest rates.

“Thus, a higher-for-longer policy rate path is warranted until inflation firmly falls within the target range, alongside a tightening bias to anchor inflation expectations,” the Fund said in a statement.

READ:  Philippine inflation rose to 5.3% in August

The central bank has kept interest rates steady at its last two meetings, but left the door open to further rate hikes to bring inflation back to its target of 2 percent to 4 percent for the year, after it quickened in August to 5.3 percent.

For 2024, the Philippine economy is projected to expand 6 percent, faster than its previous estimate of 5.5 percent, the Fund added.

The IMF’s revised projections were lower than the government’s targets of 6 percent to 7 percent this year and 6.5 percent to 8 percent next year.