The International Monetary Fund (IMF) on Wednesday trimmed its economic growth forecast for the Philippines this year to 5.8 percent from 6 percent announced in July due to the gradual pickup in private consumption of goods and services.

For next year, the IMF projected a 6.1 percent gross domestic product (GDP) expansion.

IMF Mission chief Elif Arbatli-Saxegaard said the lower forecast for this year will be driven by a gradual pickup in private consumption amid easing inflation.

The Philippine Statistics Authority reported overall inflation dropped to 3.3 percent in August from 4.4 percent in July after the government eased the tariff rate on imported rice to 15 percent from 35 percent.

Meanwhile, Bangko Sentral ng Pilipinas (BSP) had cut its policy rate for private banks by 25 basis points to 6.25 percent in August to spur more consumption of goods and services.

“We’ve noticed consumption of food and beverages has lagged. We think that will gradually pick up over the medium term. There are still some effects from the high inflation,” Saxegaard said in a media briefing at BSP Main Building in Manila City.

Ideally, BSP aims to reduce prices to 2 percent.

Due to falling food prices, Saxegaard expects local inflation this year to hit 2.2 percent, much lower than the 3.3 percent outlook the BSP announced in August. For next year, IMF sees prices to average at 3 percent, closer to BSP’s 2.9 percent projection.

The national statistician said household consumption slowed in the second quarter to 4.6 percent from 5.5 percent in the same period last year as interest rates remained high.

Saxegaard said the BSP might gradually ease its policy rate further this year to prevent inflation rebound due to excessive consumption of goods and services.

Real estate sector unpredictable

However, she said demand for and incomes from real estate might be unpredictable after the government has banned Philippine offshore gaming operators and some companies shift to a work-from-home setup.

“Continued vigilance is warranted against pockets of vulnerability in the real estate sector and a fast-growing consumer credit market,” Saxegaard said.

“Overall non-performing loans ratio remained manageable at 3.5 percent but there segments like the residential where the ratio is still above pre-pandemic level at 7 percent,” IMF Resident Representative for the Philippines Ragnar Gudmundsson said.