The weaker-than expected impact of the recent Omicron surge on the country’s economy drove the International Monetary Fund’s (IMF) most recent move to upgrade its projection on the Philippine economy.

In an e-mailed response to the BusinessMirror, IMF Resident Representative to the Philippines Ragnar Gudmundsson said the revision of their growth projection from 6.3 percent to 6.5 percent reflects the Philippines’s “signs of economic recovery” from the pandemic, beginning especially in the second half of 2021.

“The recovery momentum is expected to strengthen in 2022 owing to the weaker-than-expected impact of the domestic Omicron wave. As a result, annual GDP growth in 2022 is projected at 6.5 percent, higher than the January 2022 WEO [World Economic Outlook] forecast of 6.3 percent, notwithstanding some adverse spillovers from the virus resurgence in trading partners and the Ukraine-Russia crisis,” Gudmundsson said.

“The output gap is expected to close in 2023 and the medium-term economic growth is forecast to return to the pre-pandemic rate of 6.5 percent by 2024,” the resident representative added.

In its World Economic Outlook (WEO) released on Tuesday night, the IMF data showed an upgrade of its Philippine growth forecast from 6.3 percent to 6.5 percent for this year. For next year, the global monetary authority projects a 6.3-percent growth for the country.

Compared to the forecasts of its Asean+5 peers, the Philippines is looking to grow the fastest for 2022, followed by Vietnam’s projected growth of 6 percent, Malaysia’s projected growth of 5.6 percent, Indonesia’s 5.4 percent, and Thailand’s 3.3 percent. The average projected growth for the economic bloc this year is at 5.3 percent.

Just last week, the Asean+3 Macroeconomic Research Office (AMRO)—in their annual report the Asean+3 Regional Economic Outlook (AREO)—also forecasted a 6.5-percent growth for the Philippines for this year.

The emerging 6.5-percent projection, however, is still below the government’s target growth for 2022, which is at 7 to 9 percent.

In terms of inflation, the IMF sees the Philippines’ inflation to breach the government’s 2 to 4 percent target range and average at 4.3 percent.

This is consistent with the Bangko Sentral ng Pilipinas’s (BSP) latest inflation projection.

Gudmundsson said while the surge in commodity and food prices is projected to result in average headline inflation at 4.3 percent in 2022, the end-year inflation should come down to 4 percent, remaining within the BSP’s target band of 2-4 percent.

The resident representative also said that BSP’s stance to curb inflation remains data-driven and may call for some tightening in the second half of the year.

This is also consistent with the BSP governor’s guidance of starting to taper off monetary policy in the second half of the year.

Source: Business Mirror, 21 April 2022
https://businessmirror.com.ph/2022/04/21/recovery-momentum-spurred-imf-upgrade/