THE PHILIPPINE ECONOMY is seen to grow below target until next year, as higher US tariffs dampened exports and investments, the International Monetary Fund (IMF) said on Monday.
In a statement for its Article IV Consultation with the Philippines, the IMF trimmed its economic growth forecast for the Philippines to 5.1% for 2025 from 5.4% previously.
If realized, this will be the fourth straight year that the Philippines will miss its gross domestic product (GDP) growth target.
The IMF also lowered its 2026 growth projection for the Philippines to 5.6% from 5.7% previously. This is also below the government’s 6%-7% target for 2026 until 2028.
“The Philippines’ growth is expected to slow to 5.1% in 2025 as increasing tariffs weigh on exports and investment, before picking up moderately to 5.6% in 2026, a downward revision relative to previous forecasts due to a sharper-than-expected slowdown in (the third quarter),” the IMF said.
The Philippine economy expanded by 4% in the third quarter, the weakest growth posted since the same quarter in 2011 excluding the pandemic slowdown, as the widening flood control scandal curtailed consumer and government spending.
The country’s GDP growth stood at 5% as of September.
Meanwhile, IMF Executive Director for the Philippines Idwan Hakim, alternate Executive Director Kaweevudh Sumawong and advisor to Executive Director Maria Cynthia Sison said the Marcos administration’s macroeconomic framework has allowed disinflation and resilient growth amid external headwinds.
“However, (IMF) directors concurred 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,” they said.
Still, the IMF said the government could recover investor confidence and potentially lift economic growth if it fast-tracks structural and governance reforms.
The IMF noted that the main external risks stem from prolonged global trade policy uncertainty, geopolitical tensions, and disruptive financial market corrections.
On the domestic front, more frequent and intense climate shocks would cause notable macroeconomic losses.
On the upside, accelerated implementation of structural and governance reforms would support investor confidence and raise fiscal multipliers and potential growth.
The IMF also hiked its Philippine inflation estimate for this year to 1.7% from 1.6% previously. For 2026, it raised the inflation projection to 2.8% from 2.6%.
“Inflation declined amid a restrictive monetary policy stance and concerted efforts by the government to reduce food prices,” it said. “Inflation is projected to average 1.7% in 2025 then pick up to 2.8% in 2026 as negative base effects recede.”
This gives the Bangko Sentral ng Pilipinas (BSP) room for an accommodative monetary policy, the IMF said.
“The BSP shares the staff’s view that there is room for monetary policy to be accommodative, while remaining vigilant to risks that may undermine price stability,” it said. “The benign inflation outlook and moderating domestic demand provide room for monetary policy to support economic activity.”
The central bank’s key policy rate is now at an over three-year low of 4.5% following the Monetary Board’s fifth consecutive 25-bp cut last week. It has so far reduced borrowing costs by a total of 200 basis points (bps) since August 2024.
However, BSP Governor Eli M. Remolona, Jr. said they are approaching the end of the easing cycle, but noted that one more 25-bp reduction is possible next year depending on economic data.
The Monetary Board will hold its first meeting of the year in February. — Katherine K. Chan
