High inflation clouds Philippine growth outlook in 2023, IMF says
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.
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.
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.