IMF Executive Board Concludes 2023 Article IV Consultation with the Philippines
IMF News, December 15, 2023
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- Published: December 15, 2023
Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation with the Philippines.
- Growth momentum moderated after a strong post-pandemic recovery, reflecting external headwinds, fiscal underspending, and normalization of pent-up demand.
- The labor market has normalized, driven by the service sector.
- The current account deficit is narrowing, supported by lower imports of fuel and capital goods and a strong recovery in the service sector.
- International reserves remain adequate. Domestic financial conditions have tightened due to more stringent credit standards and a weaker exchange rate.
Macro outlook and projections
- Growth is expected to bottom out in 2023 and bounce back in the second half of 2023.
- Real GDP growth projection: 6.0 percent in 2024, with a medium-term growth potential of about 6–6½ percent.
- Inflation: headline inflation decelerated to 4.9 percent in October from the peak of 8.7 percent in January; core inflation remained elevated at 5.3 percent in October.
- Inflation is projected to gradually approach the target in early 2024, though recurrent supply shocks cloud the disinflation trajectory.
- The current account deficit is expected to continue to narrow in 2024.
- Risks to the growth outlook are tilted to the downside, mainly from persistently high inflation, a highly uncertain global economic and geopolitical environment; upside risks to inflation include higher commodity prices and potential second-round effects.
Executive Board assessment and policy guidance
- Directors commended the authorities for appropriate policy responses and implementation of key structural reforms to stimulate exports, spur foreign investment, and raise growth potential.
- Monetary policy:
- Directors agreed monetary policy has been tightened appropriately to anchor inflation expectations.
- Recommended maintaining a restrictive policy stance until inflation fully returns to target and remaining ready to tighten further if upside risks materialize.
- Allowed exchange rate flexibility to absorb shocks, while permitting temporary foreign exchange interventions under limited circumstances to ensure orderly market conditions and address risks to price stability.
- Emphasized strengthening coordination between the central bank and the Bureau of the Treasury to further develop the benchmark yield curve.
- Financial sector:
- Banking sector is well-capitalized and liquid; potential vulnerabilities in exposure to commercial real estate and leveraged corporates warrant close monitoring.
- Welcomed progress in strengthening financial supervision and regulation and the initiative to revamp the bank resolution framework.
- Encouraged further strengthening of the AML/CFT framework to exit the FATF grey list.
- Fiscal policy:
- Directors supported the pace of fiscal consolidation envisaged under the medium-term fiscal framework.
- Recommended adopting additional medium-term tax measures to create more fiscal space for policy priorities and social spending.
- Welcomed authorities’ commitment to reform the military and uniformed personnel’s pension system and to improve expenditure efficiency through digitalization.
- Structural policies and social priorities:
- Sustained efforts to reduce infrastructure and education gaps and to harness the digital economy are needed to reap the benefits of the demographic dividend.
- Stressed importance of strengthening governance and improving the ease of doing business.
- Emphasized creating quality jobs and further enhancing education and social protection programs to help reduce poverty and inequality.
- Encouraged efforts to build resilience to natural disasters and climate risks, including prioritizing climate resilient infrastructure.
Key statistics (selected, as reported)
- Real GDP growth:
- 2020: -9.5
- 2021: 5.7
- 2022: 7.6
- 2023 (Est.): 5.3
- 2024 (Proj.): 6.0
- 2025 (Proj.): 6.1
- Consumption (annual percentage change):
- 2022: 7.7
- 2023 (Est.): 4.0
- 2024 (Proj.): 6.5
- Gross fixed capital formation (annual percentage change):
- 2020: -27.3
- 2021: 9.8
- 2022: 9.7
- 2023 (Est.): 11.2
- 2024 (Proj.): 10.8
- Unemployment rate (percent of labor force):
- 2020: 10.4
- 2021: 7.8
- 2022: 5.4
- 2023 (Est.): 5.1
- 2024 (Proj.): 5.6
- Consumer prices (period average):
- 2020: 3.9
- 2021: 5.8
- 2022: 3.7
- Consumer prices (end of period):
- 2020: 3.3
- 2021: 3.1
- 2022: 4.5
- 2023 (Est.): 3.2
- Core consumer prices (period average):
- 2020: 3.4
- 2021: (table entry omitted)
- Claims on private sector (in percent of GDP):
- 2020: 52.0
- 2021: 49.9
- 2022: 48.9
- 2023 (Est.): 47.7
- 2024 (Proj.): 48.3
- 2025 (Proj.): 48.6
- National government overall balance (in percent of GDP):
- 2020: -7.4
- 2021: -8.3
- 2022: -7.2
- 2023 (Est.): -5.7
- 2024 (Proj.): -5.0
- 2025 (Proj.): -4.6
- Revenue and grants (percent of GDP):
- 2020: 15.5
- 2021: 16.1
- 2022: 15.7
- 2023 (Est.): 16.4
- 2024 (Proj.): 16.7
- Total expenditure (percent of GDP):
- 2020: 23.4
- 2021: 23.8
- 2022: 23.3
- 2023 (Est.): 21.4
- 2024 (Proj.): 21.3
- National government gross debt (percent of GDP):
- 2020: 54.6
- 2021: 60.4
- 2022: 60.9
- 2023 (Est.): 61.1
- Current account balance (percent of GDP):
- 2020: -4.5
- 2021: -3.0
- 2022: -2.6
- FDI, net (percent of GDP):
- 2020: -0.9
- 2021: -2.5
- 2022: -1.3
- 2023 (Est.): -1.0
- 2024 (Proj.): -1.1
- Total external debt (percent of GDP):
- 2020: 27.2
- 2021: 27.0
- 2022: 27.5
- 2023 (Est.): 27.1
- 2024 (Proj.): 26.5
- Gross reserves (US$ billions):
- 2020: 110.1
- 2021: 108.8
- 2022: 96.1
- 2023 (Est.): 98.1
- 2024 (Proj.): 93.4
- 2025 (Proj.): 89.4
- Gross reserves (percent of short-term debt, remaining maturity):
- 2020: 478.4
- 2021: 512.3
- 2022: 381.3
- 2023 (Est.): 351.0
- 2024 (Proj.): 372.3
- 2025 (Proj.): 332.0
- Memorandum items:
- Nominal GDP (US$ billions): 2020: 361.8; 2021: 394.1; 2022: 404.3; 2023 (Est.): 434.9; 2024 (Proj.): 471.8; 2025 (Proj.): 510.3
- Nominal GDP per capita (US$): 2020: 3,326; 2021: 3,576; 2022: 3,624; 2023 (Est.): 3,853; 2024 (Proj.): 4,133; 2025 (Proj.): 4,423
- GDP (in billions of pesos): 2020: 17,952; 2021: 19,411; 2022: 22,025; 2023 (Est.): 24,312; 2024 (Proj.): 26,565; 2025 (Proj.): 28,934
- Real effective exchange rate (2010=100): 2020: 111.3; 2021: 111.1; 2022: 109.3
- Peso per U.S. dollar (period average): 2020: 49.6; 2021: 49.3; 2022: 54.5
IMF press release, December 15, 2023
