Philippine economy to grow more slowly than previously thought

The Philippine economy will grow more slowly this year than previously thought due to the global economic slowdown and tightening financial conditions, the International Monetary Fund (IMF) said on Monday.

The IMF said the economy would expand 6.5per cent, weaker than its previous forecast of 6.7per cent, but in line with the Philippine government’s growth target of 6.5per cent to 7.5per cent.

Next year, the economy was expected to expand 5.0per cent, unchanged from its July forecast, but much weaker than April’s forecast for 6.3per cent growth.

“The economy has been able to recover swiftly and remains fundamentally sound but the world has been dealt with a 1-2 punch. The pandemic is behind but we are now confronted with a gloomier and more uncertain global economy,” Cheng Hoon Lim, IMF mission head, said in a news conference.

The Phillipines’ economy grew 7.4per cent in the second quarter.

Lim also said the Philippine central bank’s “continued near-term tightening was appropriate to keep inflation expectations anchored and reduce headline inflation.”

Philippine inflation averaged 4.9per cent in the January-August period, exceeding the central bank’s 2per cent to 4per cent comfort range.

The Bangko Sentral ng Pilipinas (BSP) has so far raised interest rates by a total 225 basis points, bringing its policy rate (PHCBIR=ECI) to 4.25per cent, to combat inflation.

The BSP’s monetary tightening comes as many central banks globally are raising rates to curb rising price pressures.