Economic growth across the ASEAN 5, collectively measured in terms of the gross domestic product (GDP) and which includes the Philippines, were to accelerate from last year’s 4.1 percent to 4.5 percent this year, according to calculations by the International Monetary Fund (IMF) in the latest iteration of the World Economic Outlook projections.
This expansion is seen accelerated further to 4.6 percent next year even as inflation, which acts as a tax on growth, were to hold steady at 8.3 percent this year across emerging economies like the Philippines but decelerating sharply next year to only around 6.2 percent.
This develops, the IMF said, as global growth was seen holding steady this year and next at 3.2 percent, unchanged from last year’s output expansion.
The sustained economic expansion across the ASEAN 5, however, represents a 0.2 percentage-point reduction from forecast growth this year but an upward revision by the same magnitude in forecast expansion next year.
Pierre-Olivier Gourinchas, chief economist at the IMF since 2022, would note that despite earlier gloomy predictions, the global economy remained resilient in 2023 as global output steadied and inflation slowed almost as quickly as it rose.
“The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russia’s war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening,” he notes in a subsequent blog the IMF published.
“Global growth bottomed out at the end of 2022, at 2.3 percent, shortly after median headline inflation peaked at 9.4 percent. According to our latest World Economic Outlook projections, growth this year and next will hold steady at 3.2 percent, with median headline inflation declining from 2.8 percent at the end of 2024 to 2.4 percent at the end of 2025. Most indicators continue to point to a soft landing,” he adds.
According to Gourinchas, keeping inflation back to target remain a priority.
“While inflation trends are encouraging, we are not there yet. Somewhat worryingly, progress toward inflation targets has somewhat stalled since the beginning of the year. This could be a temporary setback, but there are reasons to remain vigilant. Most of the good news on inflation came from the decline in energy prices and in goods inflation. The latter has been helped by easing supply-chain frictions, as well as by the decline in Chinese export prices. But oil prices have been rising recently in part due to geopolitical tensions and services inflation remains stubbornly high. Further trade restrictions on Chinese exports could also push up goods inflation,” he said.
This condition held true in the case of the Philippines whose 2023 inflation pushed past the 4-percent ceiling although the rate has moderated to 3.3 percent, or below the target of 4 percent, in the first three months this year.
The inflation which read 3.7 percent in March accelerated from only 3.4 percent in February although lower than market projections averaging 3.8 percent for the period traced to the acceleration in the price of food and transport prices.
The IMF also noted divergence across countries on the matter of monetary policy calibration, given member country differences in cyclical positions and thus the need to tailor-fit responses.
In the Philippines, Bangko Sentral ng Pilipinas governor Eli Remolona has signaled a delay in its easing cycle as it recalibrated the risk-adjusted forecast inflation to 4 percent from 3.9 percent previously in the face of higher transport prices resulting from global oil supply constraints, stubborn rice inflation, a potential wage hike and higher electricity prices.
Instead of a 25 basis-point cut in the rate at which the BSP borrows from and lends to bank as early as the third quarter this year, Remolona indicated such a cut was more likely happening in the fourth quarter, saying the monetary board has turned “somewhat more hawkish than before.”
