The International Monetary Fund (IMF) has revised its growth forecast for the Philippine economy on Tuesday, projecting a slower expansion due to persistently high inflation. The IMF now expects the Philippines’ economic growth to be 5.3% for the current year, a decrease from its July estimate of 6.2%. This adjustment follows a second-quarter slowdown in growth and an anticipation of continued high inflation negatively impacting consumer demand.
The IMF also expects Philippine inflation to average close to 6% for the year, before easing to approximately 3.5% in 2024. This elevated inflation rate may necessitate a “higher-for-longer policy rate path,” according to the Fund’s statement on Tuesday. In other words, the central bank may need to maintain higher interest rates for an extended period until inflation falls within the target range.
The central bank has held interest rates steady at its two most recent meetings, but it has not ruled out further rate hikes as a measure to bring inflation back within its target range of 2% to 4% for the year. Inflation had accelerated in August to 5.3%.
Looking ahead to 2024, the IMF projects that the Philippine economy will expand by 6%, an increase from its earlier estimate of 5.5%. However, these revised projections by the IMF are still lower than the government’s own targets of economic growth between 6% and 7% for this year and between 6.5% and 8% for next year.
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