The Asean+3 Macroeconomic Research Office (AMRO) has lowered its growth forecast for the Philippine economy to below 6 percent from 6.3 percent, citing the impact of the US reciprocal tariffs on its trading partners.
“So we have shaved down the growth (forecast for) the Philippines. It was 6.3 percent before and now it’s going to be slightly below 6 percent,” Hoe Ee Khor, AMRO chief economist, told reporters in a virtual briefing on Tuesday.
AMRO’s latest estimate is below the Philippine government’s full-year growth assumption of 6 to 8 percent.
Khor, however, acknowledged that the Philippines will be affected much less by the tariffs than its regional peers, in light of the country’s service industry.
“The manufacturing sector is less, you know. It’s important, but it’s a much smaller share of the economy compared [with] the other Asean countries. So because of that, I think the tariff impact on the Philippines will be much lower,” AMRO’s chief economist said.
“But I know you produce semiconductors, [a sector] which is exempted. So our assessment has been that the tariff rate is going to be much lower and the impact is smaller. We think that the Philippine economy generally will emerge from this tariff war quite well,” he added.
AMRO’s Asean+3 Regional Economic Outlook on Tuesday had originally shown an estimated 6.3 percent growth for the Philippines both in 2025 and 2026, which Amro clarified during the briefing has now been revised to show a pared down forecast for this year.
The revision had to be made because its previous baseline forecast published in thereport was finalized before US President Donald Trump made his April 2 tariff announcement, AMRO said.
Update due in coming months
In a separate email message to reporters, AMRO group head and principal economist Allen Ng said the situation is quite fluid at this point but his office will update its baseline estimates in the coming months.
“For now, our various scenarios of tariff actions as per the ‘Liberation Day’ and ‘Pause’ scenarios, growth in the Philippines will be negatively affected and likely will fall below six percent,” he said.
“However, the Philippine economy is one of the more resilient economies in the region given its relatively lower exposure to the tariffs and continued robust domestic demand,” Ng emphasized.
Despite the downgrade, the growth prospects of the Philippines are relatively robust but subject to several risks.
“In the near term, higher inflation triggered by local food supply disruptions and utility price shocks could be a risk to the economy, as higher living costs would reduce households’ ability to afford discretionary items and constrain household consumption,” AMRO said.
AMRO expects the Philippines’ headline inflation going faster at 3.3 percent in 2025, but eventually ease to 3.2 percent next year.
“Meanwhile, the economy could be challenged by a sharp slowdown in major trading partners, through their impacts on merchandise and services trade, tourist arrivals, overseas remittances and foreign investment inflows,” the report said.
“Heightened geopolitical risks could increase the likelihood of global supply disruptions that cause another round of upward inflation pressures, as well as further global economic fragmentation,” it added.
Over the long term, the country’s potential growth could be constrained by scarring effects caused by the pandemic, such as a gradual labor force upgrade, modest gains in labor productivity due to job quality concerns, and a subdued recovery in private investment due to financial constraints on firms; limited physical infrastructure; and climate change vulnerabilities; prompting the government to intensify efforts to address the challenges, AMRO said.
Covered economies
The report also looked into the long-term growth prospects for the covered economies in the Asean+3 region.
“Notwithstanding the projected decline, Indonesia, Malaysia and the Philippines are still anticipated to maintain potential growth above 3.5 percent through 2040,” the report said.
The Philippines is projected to maintain resilient capital accumulation, but face constraints from declining labor inputs and weak total factor productivity growth.
During the virtual briefing, Ng said one of the key factors that could actually improve the Philippines’ potential growth is productivity.
“So efforts to actually improve productivity will be key, and this can be done through productivity-enhancing infrastructure as well as a shift towards areas that are also productivity-enhancing,” Ng said.
“There are a lot of changes in technology that are rapidly evolving. The question is how can we actually utilize them to transform the economy?” Ng said.
Based on AMRO’s simulation, the Philippines could grow two percentage points more if some of these reforms are implemented.
He cited how the services sector can use technology upgrade and create value-added services that generate higher paying jobs.
“I think those would be key things to improve potential growth for the Philippines,” Ng said.
