The International Monetary Fund (IMF) has stated that the Philippine economy achieved one of the highest growth rates among emerging economies in 2022. However, the IMF forecasts a moderation in GDP growth to 6 percent in 2023, citing a challenging external environment. A team led by Shanaka Jay Peiris from the IMF recently held discussions with officials in Manila from May 8-12 to assess economic and financial developments. Peiris acknowledged the Philippines’ strong recovery following the deep economic downturn caused by the pandemic.
In response to inflation concerns, the Bangko Sentral ng Pilipinas (BSP) has raised the policy rate to 6.25 percent, aiming to anchor inflation expectations. Nonetheless, persistent core inflation suggests that a tighter monetary stance may be necessary for an extended period. Peiris highlighted the effectiveness of the regional tripartite wage setting system in linking wage increases to productivity gains. To mitigate inflation risks, he suggested maintaining a tightening bias until inflation falls decisively within the target range of 2-4 percent. The current account deficit is expected to narrow to 2.5 percent of GDP in 2023, mainly due to declining commodity prices.
Peiris stressed the importance of ongoing fiscal consolidation, which supports monetary policy and contributes to debt sustainability. Medium-term fiscal consolidation efforts should focus on targeted social spending, infrastructure investment, and promoting climate transition objectives. While the Philippines has experienced limited impact from the global banking turmoil, the IMF advised close monitoring of the financial system due to tightening conditions. Structural reforms to enhance productivity and address climate change through a green growth strategy were also highlighted as crucial by Peiris.
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