THE International Monetary Fund (IMF) on Tuesday lowered its 2025 economic growth forecast for the Philippines to 5.5 percent from a previous estimate of 6.1 percent in January.
The IMF said a global economic environment that is growing increasingly more difficult has prompted the revision of its projections related to the Philippine economy, Asia and America.
The revision reflects external developments, including the direct impact of higher tariffs on Philippine goods exports to the US, the IMF said in a statement.
Still, the 5.5 percent Philippine gross domestic product (GDP) growth forecast is the second fastest in Asia, after India’s 6.2 percent.
The IMF also revised downward its economic forecasts for the Philippines’ trading partners, while taking into account the impact of heightened uncertainty and financial tightening. These revisions spurred the IMF to take 0.6 percentage
point off the Philippines’ 2025 growth prospects.
Philippine inflation is expected to average 2.6 percent this year, slower than the January forecast of 2.8 percent.
The revised inflation forecast reflects lower-than-expected inflation results in the first quarter of 2025 and the lower projections on global fuel and food prices.
The forecasts are released through the IMF’s World Economic Outlook (WEO), a survey of prospects and policies by the IMF staff published twice a year with updates in between.
Relatively robust
Despite lowering its Philippine economic forecast, the IMF expects the economy to stay relatively robust this year.
“Downward revisions to growth are observed throughout the region and globally, reflecting the recent external developments,” it said.
“The global economy is at a critical juncture. Signs of stabilization were emerging through much of 2024, after a prolonged and challenging period of unprecedented shocks,” the IMF emphasized.
“However, major policy shifts are resetting the global trade system and giving rise to uncertainty that is once again testing the resilience of the global economy,” it added.
Global revisions
The IMF also revised its global growth forecast to 2.8 percent in 2025 from an estimated 3.3 percent in 2024. Nearly all countries are expected to post lower economic growth this year.
“Emerging and developing Asia, particularly the Association of Southeast Asian Nations (Asean) countries, has been among the most affected by the April tariffs,” the IMF said.
On the upside, the IMF noted recent legislative reforms in the Philippines could facilitate an accelerated implementation of domestic infrastructure projects, including public-private partnerships that could lead to higher foreign direct investments.
“In terms of growth drivers, domestic consumption remains the key driver for growth and is expected to be supported by lower inflation and low unemployment,” IMF said.
The 5.5 percent GDP growth forecast for the Philippines this year is higher than China’s 4.0 percent, Japan’s 0.6 percent, South Korea’s 1.0 percent and Hong Kong’s 1.5 percent.
Fastest in Asean
Compared with its Asean peers, the Philippines is expected to post the fastest growth rate for 2025.
Vietnam is expected to grow 5.2 percent, Indonesia 4.7 percent, Malaysia 4.1 percent, Singapore 2.0 percent and Thailand 1.8 percent.
The Philippines’ GDP grew 5.7 percent in 2024, missing the government’s 6 percent to 6.5 percent full-year growth assumption.
This year, Manila estimates the country’s GDP growing between 6 and 8 percent.
Inflation forecast
IMF’s 2.6 percent inflation forecast for the Philippines for 2025 is in line with the government’s target of between 2 percent and 4 percent.
“Relative to January WEO, the headline inflation projection for 2025 has been revised down by 0.2 percentage point to 2.6 percent, reflecting a lower-than-expected inflation outturn in the first quarter of 2025, and downward revisions to global fuel and food price projections,” the IMF said.
Philippine inflation slowed to 1.8 percent in March 2025 from 2.1 percent in February, bringing the national average rate to 2.2 percent in the first quarter.
Risks to the inflation outlook are broadly balanced, the IMF said.
Compared with other Asean countries, IMF’s 2.6 percent forecast for the Philippines is the second fastest after Vietnam’s 2.9 percent, with Malaysia’s 2.4 percent, Indonesia’s 1.7 percent, Singapore’s 1.3 percent and Thailand’s 0.7 percent.
‘Room’ to ease rates
The IMF said the Bangko Sentral ng Pilipinas (BSP) “has room to continue to reduce the policy rate and firmly move to a neutral stance” as inflation was within the BSP’s target range in 2024, and is expected to stay within the target range in 2025 and 2026.
“With inflation projected to remain around the BSP’s target of 3 percent, inflation expectations are well-anchored, and amid an expected widening of the output gap, there is space for a more accommodative stance,” IMF said.
After a pause in February, the policy-setting Monetary Board decided to resume its easing cycle earlier this April by reducing the Target Reverse Repurchase (RRP) Rate by 25 basis points to 5.50 percent.
In making the decision, the BSP said the more manageable inflation outlook and the risks to growth allow for a shift toward a more accommodative monetary policy stance.
Widely expected
Michael Ricafort, RCBC’s chief economist, said the downward revision is widely expected since Trump’s higher import tariffs would slow demand for Philippine exports since the US is the biggest destination of the country’s total exports.
“This would be a drag on the country’s overall economic growth,” Ricafort said.
He said Trump’s higher US import tariffs would lead to higher US inflation and could slow down the US economy, the world’s largest, and would also slow global investments, trade, employment, and overall world economic growth.
The Philippine inflation estimate by the IMF is consistent with the fact that local inflation for 2025 is seen averaging a little over 2 percent as rice prices, which accounts for the biggest share in the inflation basket, begin to go down, Ricafort added.
On the other hand, John Paolo Rivera, a senior research fellow at government think tank Philippine Institute for Development Studies, said the IMF’s revisions reflect “a confluence of global headwinds that are increasingly difficult to ignore.”
“The direct impact of rising US tariffs, particularly if they affect key PH exports like electronics and garments, could dampen external demand just as global trade is already slowing,” he said.
“We’re also feeling the spillover from weaker growth in key trading partners like China and the US, which shrinks markets for both goods and services, including business process outsourcing and tourism,” Rivera said in a separate message to this paper on Tuesday.
‘Silver lining’
Rivera said the inflation forecast of 2.6 percent is “a silver lining.”
“This gives domestic policy makers, especially the BSP, some runway to keep rates steady or even consider cuts later this year, especially if growth softens further,” Rivera said.
“Lower inflation could also support consumption and real incomes, which are vital for keeping domestic demand resilient,” he added.
While the country’s fundamentals are strong, the external uncertainties such as Trump’s tariffs, geopolitical tensions, and global monetary tightening, could limit upside potential for now, Rivera pointed out.
The WEO presents analyses and projections of the world economy in the near and medium term, which are integral elements of the IMF’s surveillance of economic developments and policies in its member countries and of the global economic system.
IMF said that all forecasts in the latest WEO are what they call the “reference point” forecast based on information available as of April 4, 2025, including the April 2 tariffs and initial responses.
