IMF Cuts Philippine Economic Growth Forecast for 2022, 2023

The International Monetary Fund (IMF) cut the growth forecast of the Philippine economy for 2022 and 2023, despite the country’s economy remains “fundamentally sound.”

This comes as an IMF team led by mission chief Cheng Hoon Lim visited the country and said at the end of their Article IV Mission that while the Philippine economy remains fundamentally sound, an uncertain global environment presents challenges to the new administration.

“Calibrating the policy mix to put the recovery on a firmer footing. Building fiscal buffers as insurance against significant downside risks. Raising long‑term growth and the standard of living for all Filipinos,” according to the IMF.

The IMF also noted that the Philippines has successfully emerged from one of the longest COVID-19 lockdowns.

“The Philippines has successfully emerged from one of the world’s strictest pandemic lockdowns, thanks to sustained reforms and disciplined macroeconomic policies that contained financial vulnerabilities and mitigated the hardships faced by the poor,” Lim said.

Moreover, the IMF lowered its projected growth of the Philippines to 6.5 percent, down from the 6.7 percent growth forecast in July.

This matches with the low end of the 6.5 percent to 7.5 percent goal of the government.

“IMF staff projected real gross domestic product to grow by 6.5% in 2022 but slow to 5% in 2023, as the confluence of global shocks weigh (on) the economy in the coming months,” Lim said.

Moreover, the IMF also lowered the country’s growth forecast in 2023 from 6.3 percent to 5 percent.

She added that the forecast is still subject to downside risks, such as a surge in COVID-19 cases, high domestic inflation rates, and global financial conditions.

“The outlook is subject to significant downside risks, where policy tradeoffs between output and inflation would become more acute. Downside risks include a surge in COVID‑19 cases from more severe variants, a more abrupt or larger-than-expected tightening of global financial conditions, a deepening of the global slowdown, persistently high domestic inflation, and natural disasters. On the upside, an end to Russia’s war in Ukraine and taming of inflation both domestically and globally could lay the foundations for stronger growth than currently envisaged,” Lim added.

One of the recommendations of the IMF is for the Bangko Sentral ng Pilipinas to continue increasing interest rates until the inflation rate in the country subsides.

The Philippine government has also lowered its growth forecast for the country from a range of 7-8 percent to 6.5-7.5 percent due to the global effects brought about by the Russian invasion of Ukraine, and the increase of interest rates by different central banks to curb inflation as the world faces recession. (GFB)