- IMF declines to suggest pace, magnitude of rate cuts
- Cuts Philippines GDP forecasts to 5.8% in 2024, 6.1% in 2025
- Sees current account deficit at 2% of GDP in 2024, 1.9% in 2025
MANILA — A “gradual” easing of monetary policy is appropriate for the Philippines as inflation returns towards the central bank’s target, the International Monetary Fund said on Wednesday.
The Bangko Sentral ng Pilipinas (BSP) cut its benchmark rate by 25 basis points to 6.25% in August, the first reduction in nearly four years as inflation eases.
“With inflation and inflation expectations returning to target, a continued gradual reduction of the policy rate is appropriate,” IMF mission chief Elif Arbatli-Saxegaard said in a briefing.
“Along this declining rate path, it will be still important for the BSP to anchor inflation expectations in the target band and remain data dependent and agile.”
The IMF, however, declined to suggest a pace and magnitude for potential cuts at the BSP’s policy-setting meetings on Oct. 16 and Dec. 19.
BSP Governor Eli Remolona said on Monday it had scope to do a 50-basis-point rate cut in one policy meeting, but such a big reduction would only happen if there were worries about a so-called hard landing for the economy.
Inflation slowed to a seven-month low of 3.3% in August, and is expected to have slowed further in September, the BSP has said.
The central bank has set a 2% to 4% inflation target for this year and next.
The IMF on Wednesday also lowered its 2024 and 2025 growth projections for the Philippines due to tepid consumption growth in the second quarter.
The Philippine economy will grow 5.8% in 2024, down from its July forecast of 6.0%, and 6.1% next year, compared to its previous projection of 6.2%, the IMF said.
Both estimates are below the Philippine government’s growth targets of 6% to 7% this year and 6.5% to 7.5% in 2025.
The Philippines’ current account deficit is seen at 2.0% of the economy this year, compared to the 2.1% forecast shortfall in June, the IMF said.
It expects that deficit to be 1.9% of GDP next year.
—Reporting by Mikhail Flores; Editing by Martin Petty and Mark Potter