By Beatriz Marie D. Cruz, A reporter
The PHILIPPINES is expected to be one of the fastest growing economies in Southeast Asia until 2029, according to the International Monetary Fund (IMF).
In the latest World Economic Outlook (WEO), the IMF pegged Philippine gross domestic product (GDP) growth at 5.8% this year, which is below the government’s target of 6-7%. This is the same forecast given after the Article IV Consultation Mission meeting earlier this month.
This will make the Philippines the second fastest growing economy in Southeast Asia, behind Vietnam (6.1%) and ahead of Cambodia (5.5%), Indonesia (5%), Malaysia (4.8%), Laos (4.1%), Timor – Leste (3%), Thailand (2.8%), Singapore (2.6%), Brunei (2.4%) and Myanmar (1%).
By 2025, the IMF kept the Philippines’ GDP growth forecast at 6.1%, lower than the government’s target of 6.5-7.5%.
The Philippines and Vietnam are expected to post the fastest growth in the region by 2025, ahead of Cambodia (5.8%), Indonesia (5.1%), Malaysia (4.4%), Laos (3.5%), Timor Leste (3.1%), Thailand (3% ), Brunei (2.5%), Singapore (2.5%) and Myanmar (1.1%).
“Growth in 2024 and 2025 is driven by rising domestic demand, supported by a gradual easing of monetary policy,” an IMF representative said in an email.
“Consumption growth will be boosted by lower food prices and the upcoming mid-term elections, while investment growth is expected to continue on the back of a push for public investment, and lower borrowing costs.”
Philippine growth will be faster than emerging and developing Asia, which is expected to grow by 5.3% and 5% in 2024 and 2025, respectively.
“Strong growth in emerging Asia is expected to decline from 5.7% in 2023 to 5% in 2025,” the IMF said, adding that thisfshows a steady decline in China and India.
“With no strong impetus for structural reforms, output growth is expected to remain weak in the medium term.”
The IMF sees growth in the region to be supported by continued demand for semiconductors and electronics, as well as increased investment in artificial intelligence (AI).
The IMF also expects the Philippines’ GDP to grow by 6.3% until 2029, still the fastest in Southeast Asia, ahead of Cambodia (6%) and Vietnam (5.6%).
“Growth in the medium term at 6.3% is expected to be supported by investment, after accelerating the implementation of PPP (public-private partnership) and FDI (foreign direct investment) projects, following recent regulatory and administrative reforms,” said the IMF representative. .
However, the IMF representative said that the risks that could weigh on economic growth include new resource shocks, geopolitical tensions, prolonged monetary policy tightening and an unexpected slowdown in major economies.
“At home, the recovery of private investment may be weaker than expected if the momentum for reform is subdued or benefits from reforms generate lower returns than expected. On the other hand, the increase in investment and productivity gains from the reforms can be high,” said the IMF representative.
Meanwhile, the IMF kept the Philippine inflation forecast at 3.3% in 2024, higher than the Bangko Sentral ng Pilipinas’ (BSP) revised estimate.fprojection of 3.1%.
By 2025, the IMF sees inflation at 3%, which is below the BSP’s projection of 3.2%.
‘ALMOST WIN’
The IMF said global growth would remain “stable but very modest,” as it kept its GDP growth forecast at 3.2% this year and next.
It noted that the global economy remains “unusually strong” and has avoided recession.
“The global fight against inflation has largely been won, although price pressures persist in some countries,” IMF Economic Adviser Pierre-Olivier Gourinchas said in a WEO report.
The whole worldfThe forecast rate will reach 3.5% by the end of 2025, slightly below the 3.6% average between 2000 and 2019.
In emerging Asia, inflation is expected to reach 2.1% this year and 2.7% in 2025, “partly due to early fiscal tightening and price controls in many countries in the region,” the IMF said.
“Although global inflation is historic, risks are increasing and now dominate the outlook: regional inflation.fdebt, monetary policy remains tight for a long time, there may be further volatility in financial markets with negative effects on sovereign credit markets, a deep growth slowdown in China, and further tightening of protectionist policies,” he said.
With the return of inflation close to the central bank’s goals, Mr. Gourinchas said the triple pivot policy is now necessary.
The base for monetary policy has begun, as central banks begin to lower policy rates, he said. However, caution is important during re-entryffinancial pressure due to high food prices and supply disruptions, he added.
The Philippine central bank began its easing cycle in August with a 25-basis-point (bp) cut, followed by another 25-bp cut at its October meeting. 16. This reduced the target repurchase rate (RRP) to 6%.
BSP Governor Eli M. Remolona, Jr. signed another 25-bp rate cut at the last Monetary Board meeting of the year on Dec. 19.
Mr. Gourinchas said that the second foundation is on fiscal policy, as now is the time to “sustain credit flexibility and to rebuild more-they need financial buffers. “
“The third pivot – and the most difficult – is in structural changes. Much remains to be done to improve growth opportunities and increase productivity, as this is the only way to face the many challenges we face: rebuilding financial resources, aging and declining populations in many parts of the world, young and growing people in Africa. seeking opportunities, addressing climate change, increasing resilience, and improving the lives of those most vulnerable,” she said.
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