The world’s economies have entered a phase of slowbalization where global output growth measured as its gross domestic product (GDP) have been recast downward this year to only 2.8 percent after having grown by 3.4 percent last year, according to the International Monetary Fund.
At the ongoing meetings of the World Bank/IMF in Washington DC, earlier tentative signs the world’s economies were to achieve a soft landing, where inflation were to come down and output growth stabilize, “have receded amid stubbornly high inflation and recent financial sector turmoil”.
Headline inflation averaging 8.7 percent last year were to fall to 7 percent this year on the back of lower commodities prices although core inflation, which takes away volatile food and energy prices, were to come down more slowly, the IMF said.
The collective assessment is for the various risks “are heavily skewed to the downside, with the chances of a hard landing having risen sharply.”
“The war in Ukraine could intensify and could lead to more food and energy price spikes, pushing inflation up. Core inflation could turn out more persistent than anticipated, requiring even more monetary tightening to tame. Fragmentation into geopolitical blocs has the scope to generate large output losses, including through its effects on foreign direct investments,” the IMF said.
In the Philippines, the cabinet-level Development Budget Coordination Committee (DBCC) have since responded by projecting local output growth ranging from 6 percent to no more than 7 percent this year, significantly slower than last year’ actual growth averaging 7.6 percent.
The expectation is for GDP growth this year to persist on its upslope path, based on various forecasts from local experts and observers.
Nevertheless, the IMF said the hoped-for return to within-target inflation for economies like the Philippines were unlikely to happen before 2025.
Headline inflation in the Philippines averaging steadily lower at 8.7 percent in January to 8.6 percent in February and 7.6 percent in March remain well above the government-set target ranging only from 2 percent to no more than 4 percent.
The 7.6 percent inflation reading in March was the lowest since September last year. Core inflation which takes out volatile food and fuels prices from the consumer price index hiked higher on annual basis but unexpectedly slowed month-on-month in March, giving policymakers some scope for optimism that interest rate adjustments that punish both households and businesses could ease at the next rate-setting meeting of the Monetary Board of the Bangko Sentral ng Pilipinas.
BSP chief Felipe Medalla more recently indicated that as inflation moderates, the Monetary Board is afforded scope to scale back the rate at which the BSP borrows from or lends to banks.
He acknowledged that the tightening cycle in monetary policy adjustments could warrant a pause at the upcoming MB meeting next month so long as inflation trends lower.
Medalla chairs the interest-rate-setting MB that has pushed borrowing costs across the country to its highest since 2007 in response to persistently higher inflation readings.
Such readings, however, have been recast lower to reflect an inflation rate of only 6 percent this year from earlier forecast of 6.1 percent and only 2.9 percent next year instead of 3.1 percent.
