THE UNITED STATES’ tariff policies may affect growth and credit conditions in Asia-Pacific economies in the coming months as the boost from the frontloading seen in the first semester recedes, S&P Global Ratings said.
“Asia-Pacific’s credit conditions are keeping steady, after strong first-half growth and supportive financing conditions,” S&P said in a Sept. 24 report. “Still, the road ahead looks bumpy.”
The credit rater said the region’s growth was mainly driven by the frontloading of exports prior to the implementation of the US’ tariffs and resilient domestic consumption.
However, trade activity is expected to slow down in the coming months as a result of higher duties.
“For Asia-Pacific manufacturers, the tariff hit will become incrementally more pronounced as the effects of trade ‘frontloading’ recede,” S&P said.
Since August, Philippine goods entering the US have been slapped with a 19% tariff, the same rate imposed on the country’s neighbors Indonesia, Cambodia, Malaysia and Thailand.
Other risks to growth include a potential slowdown in China, disruptions to financing access, falling real estate demand, bad weather and cyberattacks.
“Should shock events occur, a significant correction may occur in asset prices such as bonds, equity and real estate,” it added.
In a Sept. 22 report, S&P said the Philippine economy could grow by 5.6% this year as the country’s exports could be hit by slowing global trade due to the US’ tariff policies.
This is slower than its previous estimate of 5.9% and is at the low end of the government’s 5.5%-6.5% growth target for the year. In 2024, Philippine gross domestic product (GDP) grew by 5.7%.
The economy expanded by 5.5% in the second quarter of 2025 to bring the first-half average to 5.4%, a tad below the 2025 goal.
Despite the forecast cut, S&P still expects the Philippines to be the third-fastest growing economy in the Asia-Pacific region this year after India’s 6.5% and Vietnam’s 6.3%, it said in its latest economic outlook report.
Meanwhile, S&P also trimmed its GDP growth outlook for next year to 5.8% from 6% previously and to 6.5% from 6.6% for 2027. Its 2028 forecast was unchanged at 6.5%.
The government is targeting 6%-7% expansion for 2026 to 2028.
“As a region heavily exposed to external trade, Asia-Pacific will feel the negative impact of rising trade barriers. Still, relatively solid domestic demand, in part due to supportive macroeconomic policy, should cushion the blow,” it said.
“In Southeast Asia, we project GDP growth to ease by 0.4 percentage points from 2024 to 4.5% in 2025, on average. We expect similarly somewhat below-trend growth in 2026 as the US tariffs hit, partially offset by strong electronics demand and accommodative monetary policy.”
Meanwhile, S&P expects Philippine headline inflation to average 1.8% this year and 3% next year. This could further pick up to 3.3% in 2027 before easing to 3% in 2028, it said.
The Bangko Sentral ng Pilipinas (BSP) sees the consumer price index averaging at 1.7%, 3.3%, and 3.4% in 2025, 2026, and 2027, respectively.
Philippine headline inflation was at 1.5% in August, bringing the eight-month average to 1.7%. Both are still below the BSP’s 2%-4% target for the year.
S&P sees central banks in the region cutting benchmark interest rates further.
“We expect some more cuts, partly supported by the projected drop in US policy rates,” it said. “We see the largest room for cuts where inflation undershoots central bank targets or policymakers highlight growth risks.”
The Monetary Board last month delivered a third straight 25-basis-point (bp) cut to bring the policy rate to 5%. This brought total reductions since August 2024 to 150 bps.
BSP Governor Eli M. Remolona, Jr. has left the door open to one more cut this year that could mark the end of its easing cycle to support the economy if needed.
The Monetary Board will hold its last two meetings this year on Oct. 9 and Dec. 11.
S&P said the BSP could deliver one more 25-bp cut before yearend to bring the policy rate to 4.75%. It also expects further reductions to bring the key rate to 4% by end-2026. — K.K. Chan
