IMF hikes Philippines 2024 growth target

MANILA, Philippines — The International Monetary Fund (IMF) upgraded its 2024 economic growth forecast for the Philippines amid the stronger rebound in investments and exports.

IMF resident representative Ragnar Gudmundsson said the multilateral lender raised its 2024 gross domestic product (GDP) growth forecast for the Philippines to six percent, based on the January 2024 World Economic Outlook update from the October 2023 WEO projection of 5.9 percent.

“Real GDP growth for 2024 was revised up slightly to six percent from the October 2023 WEO forecast of 5.9 percent, reflecting slightly stronger than expected recovery in investment and exports,” Gudmundsson said in an email to The STAR.

The Philippines is expected to be the fastest growing economy in the region, exceeding Indonesia’s five percent, Thailand’s 4.4 percent and Malaysia’s 4.3 percent.

This year’s growth target is also higher than the 4.7 percent growth forecast for the entire Association of Southeast Asian Nations (ASEAN), an upgrade from the previous projection of 4.5 percent.

Despite the upgrade, the latest IMF projection sits below the 6.5 to 7.5 percent GDP growth target for the year penned by economic managers through the Development Budget Coordination Committee.

The multilateral lender said the government likely missed its growth target for 2023 as the economy likely grew by just 5.3 percent, slower than the six to seven percent target, as well as the 7.6 percent expansion posted in 2022.

The country’s GDP growth accelerated to six percent in the third quarter after slumping to 4.3 percent in the second quarter.

The IMF said the Philippines’ economic growth is expected to bottom out this year and may start bouncing back in the second half.

For 2025, the IMF sees the Philippine economy expanding by 6.1 percent, still the fastest in the region.

The multilateral lender also upgraded the global growth to 3.1 percent from the original target of 2.9 percent for 2024 and retained the 3.2 percent projection for 2025.

“Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher than the October 2023 WEO on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China,” the IMF said.

Gudmundsson said the IMF also expects inflation in the Philippines to ease back to within the two to four percent target of the Bangko Sentral ng Pilipinas (BSP).

Inflation accelerated to six percent last year from 5.8 percent in 2022, breaching the target for two consecutive years. This prompted the BSP to raise interest rates by 450 basis points since May 2022 to tame inflation and stabilize the peso.

The BSP has emerged as the most aggressive central bank in the region after hiking interest rates by 350 basis points in 2022 and by another 100 basis points in 2023.

This helped tame inflation to a 22-month low of 3.9 percent in December, after breaching the two to four percent target for 20 straight months, from a peak of a 14-year high of 8.7 percent in January last year.

“The inflation projection for 2024 has been revised up to 3.7 percent (period average) due to upward revisions in global food prices,” Gudmundsson said.

According to Gudmundsson, inflation is projected to gradually approach the mid-point of the BSP’s target range in the second half of 2024.

“The central bank is expected to stay on hold over the coming months to allow inflation expectations to settle more firmly within the target range,” he said.