INSIGHTS
- The Philippines, which had one of the highest growth rates among developing countries in 2022, is anticipated to have GDP growth drop to 6% in 2023 due to external difficulties, according to the IMF.
- The policy rate has been increased by the Bangko Sentral ng Pilipinas to 6.25 percent, although sustained core inflation may necessitate a continuing restrictive posture.
According to the International Monetary Fund (IMF), the Philippine economy saw one of the greatest growth rates among developing countries in 2022. However, in 2023, GDP growth is expected to slow to 6% owing to difficult external conditions.
From May 8–12, a team from the IMF lead by Shanaka Jay Peiris met with representatives in Manila to go through recent financial and economic developments. Following the severe economic depression brought on by the pandemic, the Philippine economy has seen one of the best recoveries among developing economies, Peiris said in a statement.
By raising the policy rate to 6.25 percent, the Bangko Sentral ng Pilipinas (BSP) has anchored inflation expectations. However, continuing core inflation raises the possibility that a tougher posture will be required in the future.
The regional tripartite wage fixing system has been beneficial to the nation and should keep tying pay raises to growth in production. Upside risks to inflation still exist, thus a prolonged tightening bias may be necessary until inflation clearly falls under the target range of 2-4%. Due mostly to falling commodity prices, the current account deficit is predicted to decrease from 4.4% of GDP in 2022 to 2.5% of GDP in 2023, according to Peiris.
Peiris stressed that fiscal reduction is taking place, supporting monetary policy and enhancing the ability to manage debt. In order to advance targeted social expenditure, boost infrastructure investment, and support climate change goals, efforts for medium-term fiscal consolidation are urged.
Despite the turbulence in the world’s banking system, little influence has been felt in the Philippines. However, due to the tightening of circumstances, the IMF advocated vigilant surveillance of the banking sector. Peiris emphasized the significance of structural changes in order to increase productivity and combat climate change by implementing a green growth plan.
