The International Monetary Fund (IMF) Executive Board has concluded its 2024 Article IV consultation with the Philippines. The meeting, held on December 4, 2024, assessed the country's economic performance and outlook.
Following a robust recovery from the pandemic in 2022, the Philippine economy experienced moderated growth of 5.5% in 2023. Growth improved to 5.8% in the first three quarters of 2024, driven by strong public consumption and construction activities. However, challenges such as El Nino weather conditions and subdued private consumption affected overall performance.
Both headline and core inflation rates decreased significantly from their peaks in early 2023 to reach 2.3% and 2.4%, respectively, by October 2024. The current account deficit also narrowed from 4.5% of GDP in 2023 to an expected further reduction in 2024 due to lower commodity prices and increased tourism and business process outsourcing receipts.
The IMF projects that growth will accelerate to reach around 6.1% by 2025, supported by disinflation and gradually declining borrowing costs as monetary policy normalizes. Inflation is anticipated to average at about 3.2% in 2024 compared to the previous year's rate of approximately 6%.
"The authorities have handled the challenges arising from multiple external headwinds well with wide-ranging plans for high and inclusive growth," noted the IMF Executive Directors during their assessment.
The Bangko Sentral ng Pilipinas (BSP) is advised to gradually ease policy rates towards a neutral stance while managing expectations amid uncertainties through careful communication.
While systemic risks within the financial system are moderate, certain vulnerabilities persist, particularly within parts of the commercial real estate sector experiencing high vacancies and falling rents.
The IMF commended significant progress made by Philippine authorities on anti-money laundering measures but emphasized continued efforts are necessary for future evaluations.
On fiscal matters, a more gradual pace of consolidation was deemed appropriate with suggestions for tax reforms aimed at raising revenues sustainably while implementing expenditure reforms effectively.
"The Philippine economy holds significant potential with its abundant natural resources... Unlocking medium-term growth potential will crucially depend on comprehensive structural reforms," stated IMF staff appraisals.
Overall, unlocking medium-term growth potential will rely heavily on implementing comprehensive structural reforms alongside strengthened social protection programs aimed at boosting job creation while reducing poverty levels across various sectors including healthcare education infrastructure development among others according digitalization opportunities available today improving access quality education promoting financial inclusion enhancing public spending efficiency