THE Philippines’ economic outlook has lost some luster against the backdrop of mounting global uncertainty, but analysts agree the country will still emerge among the strongest performers in Asia this year.
In the latest of a recent series of cuts to the Philippines’ growth forecasts, the World Bank on Friday slashed its projection for the country’s gross domestic product growth in 2025, down to 5.3 percent from a previous assumption of 6.1 percent.
This came on the heels of other downward revisions to Philippine growth forecasts made by the International Monetary Fund (IMF) and the Asian Development Bank (ADB).
Despite the cuts, private sector analysts have formed a consensus: while the Philippines is likely to fall short of the government’s 6 to 8 percent annual GDP growth target, the economy will outperform many of its regional peers.
“The Philippines’ GDP growth may be slower due to US President Donald Trump’s reciprocal tariffs, but it will still be among the highest in Asia due to its consumer-driven and services-driven economy than investment- and trade-driven economies in Asia,” one of the analysts interviewed by Malaya Business Insight, Michael Ricafort, said.
In another interview, John Paolo Rivera, senior research fellow at the Philippine Institute for Development Studies (PIDS), said, “As to meeting the lower end of the 6 to 8 percent government target, it is still possible but increasingly difficult. It would require stronger fiscal stimulus, faster public spending (especially infrastructure), and a faster-than-expected recovery in exports or remittances.”
“Interest rate cuts later this year would help, but the window is getting tighter,” Rivera emphasized.
Downgrades
The World Bank’s downward revision followed similar downgrades from the IMF, which cut its Philippine outlook to 5.5 percent from 6.1 percent, and ADB which shaved its projection to 6 percent from 6.2 percent.
The recent growth forecast from ADB, however, was released before the April 2 announcement of new tariffs by the US administration was made. As such, these projections still reflect tariffs that were previously in place.
The World Bank report showed that despite its lower growth assumption, the Philippines is still expected to be one of the strongest performers in the East Asia and Pacific region, to be outperformed only by Palau’s 8.6 percent growth potential, Mongolia’s 6.3 percent, and Vietnam’s 5.8 percent.
The IMF expects the Philippines to post the fastest growth rate for 2025 compared with its Asean peers, with the ADB saying the Philippines will be one of the region’s strongest performers after Vietnam and Cambodia.
Barring any major shocks a growth rate of 5.5 to 5.7 percent is more realistic now, Rivera said.
Resilient
“I lean closer to the IMF numbers, but still below ADB’s 6 percent, because the domestic economy remains resilient,” Rivera said.
He expects domestic consumption to keep up, with construction picking up post-budget release.
“But external headwinds and high interest rates will drag slightly. This can still be reinforced, especially since we have an election year,” he said.
The World Bank’s reduction of the Philippine outlook reflects a more cautious global view, particularly with rising trade tensions affecting export-driven economies, the research fellow from PIDS said.
“The World Bank seems to be pricing in weaker external demand, high borrowing costs, and slower private sector investments more heavily than the IMF and ADB, which might explain why their forecast is a bit more pessimistic,” Rivera said.
“Vietnam might post around 6 percent due to better manufacturing, while Thailand and Malaysia will grow slower at 3 to 4 percent because they’re more export-dependent and sensitive to China’s slowdown,” he said.
“Philippine growth will remain respectable, even if a bit below the original government aspirations, especially if we get some boost from election spending,” Rivera added.
Despite the issues lending pessimism to most if not all economies, the Philippines is still going to grow faster relative to most countries, Reinielle Matt Erece, economist at Oikonomia Advisory & Research Inc.
“The growth forecast adjustments were brought by the increasing tensions in the global economic environment. As the tension between China and (the) US escalates, which are also two of our biggest trading partners, these issues can drag down growth,” Erece said.
“However, we can see that as a consumption-driven economy we are still poised to grow relatively faster compared with most countries, especially within the Asean,” he added.
Erece noted the 6 to 8 percent growth target of the government may be quite optimistic, as the country’s GDP may grow closer to the lower end of this range.
“But whether we grow faster than expected and maintain momentum through 2026 will depend on how policymakers react to the economy’s performance as we’ll see with the first quarter report,” he said.
5.5%-6% possible
Meanwhile, Ricafort, who serves as Rizal Commercial Banking Corp. chief economist, said 5.5 to 6 percent economic growth for the Philippines remains possible this year.
Philippine exports are not that huge compared with other Asean or Asian countries, that the slowdown in global trade as a result of the US initiated trade war will have limited impact on the Philippines, he said.
Ricafort said consumer spending accounts for 75 percent of the Philippine economy, in contrast to other Asian economies that are more dependent on exports as a major source of economic growth, and that would help insulate the Philippine economy from any slowdown in global trade.
The Philippines’ GDP growth may be slower due to US President Donald Trump’s reciprocal tariffs, but it will still be among the highest in Asia due to its consumer-driven and services-driven economy than investment- and trade-driven economies in Asia, Ricafort emphasized.
WB’s realistic assessment
Astro del Castillo, managing director of First Grade Finance, Inc., said the World Bank’s revisions reflect a realistic reassessment of the Philippines economic prospects on the back of unprecedented global trade uncertainty and slower global growth.
“While still among the fastest-growing economies in the region, the Philippines faces significant external headwinds that will likely temper its economic expansion in the near term,” Del Castillo said.
For First Grade’s managing director, the downward revision also highlights the country’s vulnerability to external shocks in times of trade tensions and global economic shifts.
“However, the country’s relatively strong domestic consumption, supported by easing inflation and government stimulus, provides a buffer that helps sustain growth above that of many regional peers,” Del Castillo said.
“The government should remain focused on the economy despite the midterm elections. The lowered forecasts signal a need for cautious policy planning and readiness to adapt to evolving global economic conditions,” he added.
On the other hand, if the government does not respond aggressively to the uncertainties thinking it can lure foreign companies to settle here, the growth can even be lower than 5 percent, Leonardo Lanzona, Ateneo de Manila University economist, said.
“I had always thought that the government targets are difficult to reach. It is not so much the tariffs that will affect the country since our trade is not significant to begin with. It is the uncertainty that is associated with the tariffs, along with the possibility of a global recession,” Lanzona said.
“In this case, the target has become out of reach. World Bank’s estimates are perhaps more feasible than the relatively more optimistic estimates,” he added.
Given the current protectionist trend trade would no longer be optimal, but engaging in trade war is counterproductive.
“Trade will still be viable but now has to be limited to trustworthy allies and be strategic to avoid the distortions caused by the tariff. In this case, the government needs a comprehensive plan to address these trends with a forward looking goal towards developing local industries,” Lanzona said.
“Thinking that we can attract industries to come to the country because the US tariffs imposed on us are lower is just as delusional as Trump’s tariffs,” he added.
Lanzona sees an opportunity in what is happening now to provide local industries with subsidies, especially those with high value-added production, and discourage dependency on imports.
“Micro, small and medium-sized enterprises should be linked to export-oriented and high value-added industries in order to achieve scale economies. Apart from trade policies, now is the time for an industrial policy,” Lanzona emphasized.
Tighter local competition
Meanwhile, Nomura Global Markets Research chief Asean economist Euben Paracuelles told reporters in an emailed message that a prolonged US-China trade war could increase China’s import penetration into non-US markets like the Philippines, suggesting higher competition for local industries.
“On the other hand, this could also help keep CPI inflation pressures low and allow the central bank to pursue accommodative monetary policy as needed,” Paracuelles said.
“Countercyclical macro policies will be necessary in the short run, including fast-tracking investment spending and infrastructure implementation,” he said.
“Importantly, continuing structural reforms to boost competitiveness will be key, including measures to diversify the manufacturing base that efficiently leverages on the country’s comparative advantage and to reduce operating costs, including power rates and ease of doing business,” Paracuelles added.
