philippine economy The International Monetary Fund (IMF) said on Monday that GDP growth is likely to remain below target until next year, as higher US tariffs hit exports and investment.
In a statement for its Article IV consultation with the Philippines, the IMF lowered its economic growth forecast for the Philippines for 2025 to 5.1% from 5.4% previously.
If realized, it would be the fourth consecutive year that the Philippines will miss its gross domestic product (GDP) growth target.
The IMF lowered its 2026 growth projection for the Philippines to 5.6% from 5.7% previously. This is also lower than the government's target of 6%-7% from 2026 to 2028.
“Philippines' growth is expected to slow to 5.1% in 2025 as tariff increases hit exports and investment, rising modestly to 5.6% in 2026, lower than previous forecasts due to a sharper-than-expected slowdown in the (third quarter),” the IMF said.
The Philippine economy expanded 4% in the third quarter, the weakest growth recorded since the same quarter in 2011 barring the pandemic recession, as the widespread flood control scandal dampened consumer and government spending.
The country's GDP growth till September was 5%.
Meanwhile, IMF Executive Director for the Philippines Idwan Hakim, Alternate Executive Director Kawivudh Sumavong and Advisor to Executive Director Maria Cynthia Sison said the Marcos administration's macroeconomic The framework allowed deflation and flexibilityRapid growth amidst external adverse conditions.
“However, (IMF) directors agreed that the balance of risks to the growth outlook is tilted to the downside amid uncertainty from global trade policies, corruption allegations related to flood control projects, and extreme climate events,” he said.
Nevertheless, the IMF said the government could regain investor confidence and potentially boost economic growth if it rapidly pursued structural and governance reforms.
The IMF said the main external risks arise from prolonged global trade policy uncertainty, geopolitical tensions and disruptive financial market reforms.
On the domestic front, more frequent and intense climate shocks would cause significant macroeconomic losses.
On the positive side, prompt implementation of structural and governance reforms will support investor confidence and enhance fiscal multiples and potential growth.
The IMF also raised its Philippine inflation forecast for this year to 1.7% from 1.6% previously. For 2026, it raised its inflation forecast to 2.8% from 2.6%.
“Inflation declined amid a restrictive monetary policy stance and concerted efforts by the government to moderate food prices,” it said. “Inflation is projected to average 1.7% in 2025 and reach 2.8% in 2026 as the negative base effect subsides.”
The IMF said this gives the Bangko Sentral ng Pilipinas (BSP) room for an accommodative monetary policy.
“The BSP shares the staff view that there is room for further accommodative monetary policy, while remaining vigilant against risks undermining price stability,” it said. “The benign inflation outlook and moderate domestic demand provide room for monetary policy to support economic activity.”
The central bank's key policy rate is now at a three-year low of 4.5% after the Monetary Board's fifth consecutive 25-bp cut last week. This has reduced borrowing costs by a total of 200 basis points (bps) from August 2024 till now.
However, BSP Governor Eli M. Remolona, Jr. said they are nearing the end of the easing cycle, but he said another 25-bp rate cut is possible next year depending on economic data.
The Monetary Board will hold its first meeting of the year in February. , Katherine K. chan
