The International Monetary Fund (IMF) has highlighted that the Bangko Sentral ng Pilipinas (BSP) may continue its tightening measures due to persistent high inflation rates in the country.
Jay Peiris, IMF’s Mission Head, said that the risks of inflation remain on the upside, warranting a continued tightening bias until inflation falls within the target range of 2-4 percent.
Despite the Philippines’ robust 7.6 percent GDP growth in 2022, which was one of the highest among emerging economies, the IMF expects more modest GDP growth of six percent for 2023. This outlook reflects the challenging external environment and the persistent issue of elevated inflation.
The IMF’s projections for both 2023 and 2024 are lower than the government’s targets.
Elevated core inflation remains a concern, prompting the IMF to recommend that the BSP maintains a “tighter for longer” stance, even though headline inflation has shown a decline in recent months.
To address inflationary pressures, the BSP’s Monetary Board has already raised the key borrowing rate by 425 basis points to 6.25 percent as of March 23, aligning its approach with the US Federal Reserve’s tightening measures.