MANILA – The International Monetary Fund (IMF) expects the country's gross domestic product (GDP) to grow faster in the second half of the year and further accelerate in 2024.
"Real GDP growth is expected to bounce back in the second half of 2023 and reach 6 percent in 2024, supported by an acceleration in public investment and improved external demand for the Philippines’ exports," according to the IMF 2023 Article IV Consultation report released over the weekend.
For this year, the IMF projects the Philippine economy to grow by 5.3 percent.
"The government’s infrastructure program, opening up of sectors to greater foreign investment, and private sector participation through PPP (public-private partnership) modalities will gradually crowd in private investment and help realize a growth potential of about 6 to 6.5 percent over the medium term," it said.
Meanwhile, headline inflation is forecast to average 6 percent this year.
For 2024, the IMF revised upward its projection to 3.7 percent from the previous 3.5 percent.
"Inflation is projected to gradually approach the target in early 2024, though recurrent supply shocks cloud the disinflation trajectory," it said.
The report said the current account deficit is expected to narrow to 3 percent of GDP this year and 2.6 percent in 2024, supported by lower global commodity prices and a pickup in electronics exports in the second half of the year.
The fiscal consolidation is also expected to continue next year.
Meanwhile, the IMF said risks to the near-term growth outlook are tilted to the downside.
It said elevated inflation, both globally and locally, can necessitate a further tightening of monetary policy while the projected global slowdown in China could also affect trade.
"Intensification of geopolitical tensions and fragmentation could disrupt supply chains and investment. On the other hand, a more resilient US economy could propel the Philippines’ electronic and service exports alongside a rebound in domestic demand supported by an easing of financial conditions," the IMF said.
Risks to inflation are tilted to the upside, it added.
The IMF said higher global oil prices could result in inflationary pressure, while global or domestic food prices and the El Niño weather phenomenon could exert renewed price pressures.
"Even though the outcome of the wage negotiations for Metro Manila in July 2023 was not as high as initially anticipated, risks of second-round effects and continued political pressure to further raise the minimum wage remain," it said. (PNA)
