IMF keeps 2023 Philippines growth forecast, but cites inflation risk

MANILA (Reuters) – The International Monetary Fund (IMF) kept its economic growth forecast for the Philippines this year at 6.0%, but said on Friday high inflation was a downside risk to the outlook and should be tackled with both fiscal and monetary measures.

The IMF projected next year’s GDP expansion for the Philippines to come in between 5.5% and 6.0%, compared with its previous forecast of 5.8%.

“Risks to inflation remain on the upside, and a continued tightening bias maybe appropriate until inflation falls decisively within the 2-4 percent target range,” the Fund said in a statement issued following a staff visit to Manila.

The IMF’s growth forecast for this year is at the low end of the government’s growth target of 6.0% to 7.0%.

Its latest assessment of the Philippine economy follows the country’s stronger-than-expected economic performance in the first quarter, which puts it on track to meet growth goals for this year and next.

Although growth in the first quarter was the Philippines’ slowest in two years at 6.4%, it was among the fastest in Southeast Asia.

“The main downside risks to the outlook continue to be persistently high core inflation, depreciation pressures amid tighter global conditions, geoeconomic fragmentation, and balance sheet impacts related to higher borrowing costs,” the IMF said.

The Bangko Sentral ng Pilipinas has signalled it may pause its aggressive tightening cycle when it meets this month after inflation eased for a third straight month in April to 6.6%.

“Fiscal consolidation is underway and complements monetary policy in the tightening of the overall macroeconomic policy stance,” the IMF said.

The IMF also said the Philippine banking system has sufficient liquidity and capital buffers, and spillover effects from the global banking turmoil have been limited.

“However, amid tighter financial conditions, the corporate sector will warrant close monitoring,” it said.

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