The International Monetary Fund (IMF) has revised downward its forecasts for the Philippines’ 2025 and 2026 economic growth to 5.4 percent and 5.7 percent, respectively, seeing “negative external spillovers” from shifting trade policies, geopolitical tensions and global market volatility.
The previous IMF projections for the country — announced in July as part of the World Economic Outlook update report — were 5.5 percent for 2025 and 5.9 percent for 2026.
IMF officials, in their conclusion to the September 18 to October 1 Article IV Consultation with Philippine officials, said on Wednesday the local economy remains resilient and has achieved disinflation despite external spillover shocks.
The IMF team, led by Elif Arbatli Saxegaard, said growth this year and in 2026 is supported by monetary policy easing, manageable inflation and reforms to encourage investments.
She added, however, they revised their forecasts lower because of the muted January to June gross domestic product growth, which stood below the government target range of 5.5-6.5 percent.
“The revision reflects factors related to the first-half performance, which was weaker than expected,” she said in a press briefing on Wednesday.
Risks remain
While IMF expects lower average domestic inflation of 1.6 percent this year — lower even than the central bank’s own 1.7 percent estimate — with the continued current account deficit, “risks to the growth outlook are tilted to the downside.”
“The inflation outlook is quite favorable (but) we also see downside risks to growth and the output gap. In line with this, there is more room for a more accommodative policy stance,” Saxegaard, an economist, said.
The Bangko Sentral ng Pilipinas (BSP) has room for further easing to ensure inflation stays within the 2-4 percent target range, she added.
She said the exchange rate can continue as market volatility “shock absorber.”
“Overall systemic financial risks remain moderate, and the banking system has strong capital and liquidity buffers,” Saxegaard said.
She also pointed out that external risks persist, such as global trade and geopolitical tensions, as well as “disruptive financial market corrections.”
On the domestic side, she cited downside risks emanating from frequent and intense climate shocks that translate to macroeconomic losses.
However, on the upside, the “accelerated implementation of structural and governance reforms would support investor confidence and the fiscal multiplier and raise potential growth,” the IMF said, quoting Saxegaard in a separate statement.
Fiscal consolidation
The IMF noted that the 2025 government expenditure program for the most part has been restricted by fiscal condition, but it expects next year’s budget to promote a more neutral fiscal stance.
Saxegaard said the government has the space for a gradual fiscal consolidation and to “replenish fiscal buffers and support external balance.”
The IMF recommends concrete and durable tax measures to increase the budget for priority spending, which it sees having more of an impact on growth.
“Efforts to strengthen budget credibility by enhancing public financial management remain critical, including strengthening investment planning and project appraisal, selection, management and procurement to enhance accountability,” the IMF official said.
