The International Monetary Fund, or IMF, predicts the economy to slightly expand by six percent this year due to sticky inflation and high-interest rates in the first several months.

The growth forecast is better than the year-ago level of 5.6 percent recorded by the Philippine Statistics Authority and the IMF’s estimate of 5.9 percent for the same period.

IMF director Akihiko Yoshida expects the growth to be driven by more investments and exports this year.

“While the outlook for the Philippines economy is favorable, risks to the near-term growth outlook is tilted to the downside,” he said last Wednesday in a media briefing on IMF’s economic outlook for Asia and Pacific.

Yoshida believes Philippine inflation will stay elevated in the first half before declining to 3 percent in the next half, encouraging the Bangko Sentral ng Pilipinas to cut its policy rate.

This could result in higher consumer and corporate spending starting mid-year.

Inflation tipped improving

The central bank currently imposes a 6.5 percent rate. It expects January inflation to improve to 2.8 to 3.6 percent from 3.9 percent in December.

Last year, household consumption, which accounts for at least 70 percent of gross domestic product, remained robust at 5.1 to 6.4 percent growth based on data from the statistics authority.

Meanwhile, investments in capital goods jumped by 11.2 percent in the fourth quarter of 2023 from a negative growth of 1.4 percent in the third quarter.

Exports of services also improved to 12.3 percent from 11.4 percent during the period.

However, goods exports posted further negative growth to 11.6 percent from 2.3 percent.