The Market Monitor Minding the Nation's Business
The Philippine economy is poised for moderate growth acceleration in 2024 and 2025, driven by easing inflation and gradual normalization of monetary policy, according to the International Monetary Fund (IMF).
“Growth is expected to accelerate in 2024-25, supported by disinflation, and gradually declining borrowing costs as monetary policy normalizes,” stated the IMF following its 2024 Article IV consultation with the Philippines.
Under Article IV of the IMF’s Articles of Agreement, annual bilateral consultations are conducted to assess member countries’ economic performance and policies. This involves staff visits, data collection, discussions with officials, and a final report reviewed by the IMF Executive Board.
The IMF projects Philippine economic growth to reach 5.8% in 2024, up from 5.5% in 2023, and further rise to 6.1% in 2025. The medium-term potential output is estimated between 6% and 6.3%.
“Philippine authorities handled the challenges arising from multiple external headwinds well with wide-ranging plans for high and inclusive growth,” the IMF highlighted in its report. It noted the resilience of the Philippine economy despite external shocks and tighter global monetary conditions.
The IMF underscored the Philippines’ significant growth potential, citing its natural resources, blue economy, and demographic advantages. However, it emphasized that realizing this potential will require comprehensive and well-coordinated structural reforms.
“These reforms, coupled with strengthened social protection programs, should aim to boost job creation, enhance productivity, increase resilience to climate change, and reduce poverty and inequality,” the IMF stated. Priority areas include upgrading infrastructure, enhancing healthcare and education, addressing agricultural challenges such as land fragmentation and low productivity, and improving governance.
Inflation is expected to drop to 3.2% in 2024, down from 6.0% in 2023, supported by measures such as lower rice import tariffs and non-monetary efforts to stabilize food prices. The IMF noted that easing inflation would help bolster consumer spending and overall economic growth.
With inflation expectations aligning closer to target levels, the Bangko Sentral ng Pilipinas (BSP) may have room to further lower policy rates. The BSP has already cut rates by a total of 75 basis points this year. The IMF emphasized that a data-driven approach and clear communication will be critical to managing expectations amid uncertainties and frequent supply-side shocks.
The IMF cautioned that downside risks to the Philippine economy remain. These include commodity price volatility, supply shocks, geopolitical tensions, prolonged tight monetary policies in advanced economies, slower growth in major global markets, and extreme climate events. Additionally, stalled reforms or weaker-than-expected outcomes from policy initiatives could hinder growth prospects.
Despite these challenges, the IMF remains optimistic about the Philippines’ ability to sustain its growth trajectory through continued reform efforts and strategic investments in key sectors.