International Monetary Fund cuts 2019 Philippine growth forecast

MANILA, Philippines — The International Monetary Fund (IMF) has lowered anew the gross domestic product (GDP) growth forecast for the Philippines with the expected slowdown in global economic growth.

In its April 2019 World Economic Outlook (WEO), the IMF slashed anew its 2019 economic growth forecast for the Philippines to 6.5 percent and to 6.6 percent for  2020.

The latest growth forecast was lower than the original growth target of 6.6 percent reported by the multilateral lender in its October 2018 Regional Economic Outlook (REO).

Despite the downward revision, the Philippines, together with Vietnam, is still expected to post the fastest GDP growth among the Association of Southeast Asian Nations–5 (Asean-5) followed by Indonesia with a  5.2 percent growth, Malaysia with 4.7 percent, and Thailand with 3.5 percent.

By 2020, the Philippines is expected to be the fastest growing economy based on IMF estimates and better than Vietnam’s 6.5 percent growth, Indonesia’s 5.2 percent, Malaysia’s 4.8 percent, and Thailand’s 3.5 percent.

Philippine economic growth slowed down to 6.2 percent last year from 6.7 percent in 2017 due to lower agricultural output and the series of rate hikes by the Bangko Sentral ng Pilipinas (BSP) that dampened economic activity.

Inflation shot up to 5.2 percent last year from 2.9 percent in 2017, exceeding the  BSP’s  two to four percent target, due to elevated oil and food prices as well as weak peso.

The faster rise in consumer prices prompted the central bank to lift interest rates by 175 basis points in five straight rate-setting meetings from May to November to prevent inflation from spiralling out of control.

IMF sees inflation easing back to within the central bank’s two to four percent target rates at 3.8 percent this year and 3.3 percent next year.

The central bank expects inflation to settle at an average rate of 3.1 percent this year and three percent next year.  

Global economic growth is expected to ease to 3.3 percent this year from 3.6 percent last year before recovering back to 3.6 percent in 2020, according to the IMF.

It also expects a slower growth of 1.8 percent this year from 2.2 percent in 2018 for advanced economies.

US GDP growth may ease to 2.3 percent from 2.9 percent and the euro area to 1.3 percent from 1.8 percent, the IMF said.

Likewise, the IMF sees the GDP growth of China easing to 6.3 percent this year from 6.6 percent in 2018.

“Following a broad-based upswing in cyclical growth that lasted nearly two years, the global economic expansion decelerated in the second half of 2018.

Activity softened amid an increase in trade tensions and tariff hikes between the US and China, a decline in business confidence, a tightening of financial conditions, and higher policy uncertainty across many economies,” the IMF said.