The International Monetary Fund (IMF) has raised its Philippine economic growth forecast to 6.5 percent for this year from its January estimate of 6.3 percent, as they see sustained momentum for the country in achieving pre-pandemic growth.
The IMF’s April 2022 World Economic Outlook (WEO) is also projecting the country’s gross domestic product (GDP) to expand by 6.3 percent in 2023.
The IMF’s GDP estimate for 2022 is below the government’s seven percent to nine percent projection for this year but within the six percent to seven percent forecast range for 2023. However, the 6.5 percent growth forecast for the Philippines is the highest in the ASEAN-5 trade bloc for 2022.
IMF Resident Representative to the Philippines, Ragnar Gudmundsson, said economic recovery has began since the second half of 2021, pushing the GDP to grow by 5.6 percent last year.
“The recovery momentum is expected to strengthen in 2022 owing to weaker-than expected impact of the domestic Omicron wave,” said Gudmundsson in an email.
The IMF official said the revised 6.5 percent GDP forecast for 2022 which was higher than the January WEO projection of 6.3 percent is “notwithstanding some adverse spillovers from the virus resurgence in trading partners and the Ukraine-Russia crisis.”
“The output gap is expected to close in 2023 and the medium-term economic growth is forecast to return to the pre-pandemic rate of 6.5 percent by 2024,” he said.
The IMF’s latest WEO has a more dire forecasts for global growth compared to its January WEO due to Russia’s invasion of Ukraine last Feb. 24.
The IMF has cut its global growth projection this year and in 2023 to 3.6 percent, or 0.8 and 0.2 percentage points lower than in the January forecast, respectively. The downgrade largely reflects the war’s direct impacts on Russia and Ukraine and global spillovers, it said. The estimated global growth for 2021 is 6.1 percent.
The IMF said the Russia-Ukraine war, which has triggered a costly humanitarian crisis, happened when the global economy was still mending. The global economy “had not yet fully recovered from the COVID-19 pandemic (and) with a significant divergence between the economic recoveries of advanced economies and emerging market and developing ones” this has set back the momentum of a full global growth.
The IMF noted that the economic costs of the war will spread across the world in terms of commodity markets, trade, and financial interlinkages. “Fuel and food price rises are already having a global impact, with vulnerable populations—particularly in low-income countries—most affected,” it said.
“In addition to the war, frequent and wider-ranging lockdowns in China—including in key manufacturing hubs—have also slowed activity there and could cause new bottlenecks in global supply chains,” the IMF also noted. “Higher, broader, and more persistent price pressures also led to a tightening of monetary policy in many countries. Overall risks to economic prospects have risen sharply and policy trade-offs have become ever more challenging,” it added.
The IMF forecasts emerging and developing Asia which also includes China and India to grow by 5.4 percent in 2022 and 5.6 percent in 2023, versus the projection for 2021 of 7.3 percent.
The ASEAN-5 economy, which includes the Philippines, are expected to grow by 5.3 percent in 2022 and 5.9 percent in 2023 from its 2021 estimate of 3.4 percent.
The Philippines’ 6.5 percent GDP growth forecast for this year is the highest in ASEAN, followed by Vietnam with six percent, and Malaysia with 5.6 percent. However for 2023, Vietnam’s economy is expected to expand faster at 7.2 percent compared to the Philippines’ 6.3 percent which was the second highest GDP forecast next year in the regional trade bloc.
The Philippine government is transitioning to a new administration after the May 9 national elections next month, when a new chief executive in Malacanang will take over from the Duterte government.
Gudmundsson said the next Philippine president should have “steadfast implementation of structural reforms (that) would not only aid the post-COVID-19 recovery but also help to reduce inequality and strengthen resilience to natural disasters.”
He emphasized continuity and that the next president should continue efforts started by past administrations in streamlining the ease of doing business and to “reduce infrastructure gaps (to) help rekindle investment and new businesses, thereby helping offset long-term scarring effects on employment.”
“These efforts should be combined by targeted training and education efforts, which would facilitate labor movement across sectors. Increased spending on social protection, particularly health and education, further strengthening public service delivery, and meeting commitments on climate change would foster more inclusive and greener growth,” said Gudmundsson.
The IMF and the World Bank Group are currently holding its annual spring meetings in Washington DC which started April 18 until April 24.
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