IMF Suggests That PH Needs to Adjust Policy for Economic Recovery

According to the International Monetary Fund (IMF), the Philippines would need to adjust its policies to have a more stable economic recovery.

After their 2022 Article IV consultation discussions held last September, the IMF’s Executive Directors mentioned how keeping up with economic recovery would entail focused policies to tackle productivity growth, alleviating pandemic effects with reforms, inflationary risks, and increased financial and fiscal resilience.

“Calibrating the policy mix to preserve macroeconomic stability, enhancing fiscal and financial resilience, and accelerating structural reforms are critical to sustain the recovery. Monetary and fiscal policies are aligned in the right direction to support external and domestic balance,” said IMF.

The Bangko Sentral ng Pilipinas (BSP) has increased key policy rates by 300 basis points, which brings the overnight reverse purchase rate to 5% which is a 14-year high.

In the first 10 months of the year, inflation averaged 5.4% which was above the target of 2-4% of the BSP. Inflation went to a 14-year high of 7.7% back in October coming from 6.9% back in September.

The BSP’s Monetary Board is predicted to further increase interest rates after the last rate-setting meeting for 2022.

The IMF mentioned that “A tightened policy stance will keep inflation expectations anchored and help alleviate pressure on capital outflows and the exchange rate. Exchange rate flexibility remains important as a shock absorber against the backdrop of persistent terms of trade shock and a wider current account deficit,”

“Policies will have to remain nimble, carefully balancing growth and price stability objectives, while managing limited fiscal buffers, preserving financial stability, and ensuring external sustainability,”

Source: Philstar