No huge dent seen from US tariffs
Global financial think tank Moody’s Analytics lowered its Philippine growth forecast to 5.9 percent for 2025 from an earlier forecast of 6 percent after taking into account the overall global uncertainty resulting from US President Donald Trump’s trade policies.
While the US-led trade war is expected to have little impact on the Southeast Asian country’s economy, external conditions would still weigh on the pace of domestic growth.
“The threat of more US tariff hikes and the potential for slower global interest rate normalisation create uncertainty in global demand. That will hurt the Philippines’ exporters and industrial producers,” Sarah Tan, Moody’s economist for the Philippines and China, told Malaya Business Insight.
However, she added that a tight labor market and a healthy inflow of remittances will give consumption a boost.
‘Not really a slowdown’
“While the expected growth is shy of the government’s target, it will mark the strongest expansion in three years,” Tan said.
“Private consumption and investment will be the key driver of growth in the Philippines, supported by a stable inflation and easing monetary policy,” Tan said in response to an email query.
The impact of the Trump policies will not be as large on the Philippine economy compared with other economies in the region, she added, saying the Philippines “stands out as one of the fastest growing economies in Southeast Asia.”
“The Philippines kind of stands out as one of the fastest growing economies in Southeast Asia,” Tan told participants in the webinar, “Asia-Pacific Economic Outlook, Uncertainty Abounds,” also on Wednesday.
“A lot of that is coming from the strength, from its domestic economy, given that it’s, you know, highly reliant on its private consumption. (Our forecast is) not really much of a slowdown compared to other economies,” Tan said.
The Philippine Statistics Authority announced in January the gross domestic product (GDP) grew 5.6 percent in 2024, short of the government’s 6 percent to 6.5 percent target.
Weaker consumption and weather disruptions that squeezed farm output weighed on the economy.
‘Huge dent unlikely’
Reciprocal tariffs, or any tariffs that come from the US will definitely hurt the Philippines exporters, but only because the US is the largest export destination for the Philippines.
“So it is unlikely to leave a huge dent on the macroeconomy, but it will definitely hurt these exporters and manufacturers,” Tan said.
A tight labor market and a healthy inflow of remittances will give consumption a boost, she said.
Moody’s expects inflation to ease from 2024 levels and average 2.8 percent in 2025 and 3 percent in 2026. Both are well-within the Bangko Sentral ng Pilipinas’ target between 2 and 4 percent for 2025 and 2026.
Tough balancing act
However, Tan said the BSP faces a tough balancing act to maintain price stability and economic growth.
“Progress on the inflation front supports the case for more rate cuts. However, as US tariffs could slow global demand and the pace of interest rate normalization, the Philippine central bank will be more cautious about monetary easing to avoid significant weakening of the peso,” Tan said.
Moody’s also sees the BSP lowering policy rates by 50 basis points to 5.25 percent by the end of 2025.
“As for how the impact of Trump policies will affect the Philippine economy, I think if we take a step back, the Philippines’ export reliance is pretty small, especially compared with other Southeast Asian economies,” Tan said.
“And that’s why, you know, the impact of Trump policies on the Philippine economy is not as large as what we’re seeing in other countries, maybe like in Thailand or Indonesia,” she added. ~0~
