Southeast Asian economies are in for a bumpy ride this year, and although less exposed to the “significant shock” from the US tariffs, Philippine growth expected for this year has also been cut from the previous forecast, the Australia and New Zealand Banking Group (ANZ) said in a report.
Sanjay Mathur, ANZ chief economist for Southeast Asia and India, said in the report: “On balance, the combination of US tariffs and slower growth in the US and mainland China represents a significant shock to the region. Our revised GDP forecasts correspond to negative output gaps. A permanent slowdown in global trade and growth could even result in lower potential growth for Asia (ex-China).”
The situation right now, coupled with the prospect of global uncertainty, has compelled ANZ to downgrade its growth forecast for the Philippine economy to 5.0 percent from 5.7 percent in its January 2025 report.
2nd fastest in Asean
Despite the revision, ANZ said, the Philippine economy will be the second fastest economy in Southeast Asia, after Vietnam’s 5.5 percent growth forecast.
“Our revised GDP forecasts correspond to negative output gaps. A permanent slowdown in global trade and growth could even result in lower potential growth,” Mathur said.
While the Melbourne-based ANZ expects the Philippines to somewhat recover from this year’s economic shock, it sees GDP growth for the country in 2026 at 5.5
percent, down from its previous forecast of 6.0 percent, but up from 2025.
Business constraint
Mathur sees it likely that some Asian economies will negotiate down or even do away with the reciprocal tariffs imposed by Trump earlier this month, but the ANZ does not see this development doing much good to ease the trade spat between China and the US, and its fallout on Beijing and Washington’s trading partners.
“Even so, the uncertainty around US trade policies will constrain business activity, including hiring and investment. We assume that final tariff rates will be between those announced on April 2 and the universal baseline rate of 10 percent,” Mathur emphasized.
Obviously, the final rates will vary for each economy depending on the outcome of bilateral negotiations with the Trump administration, he added.
ANZ’s latest forecasts included expectations of the tariffs’ negative impact on global trade as well as the bilateral trade agreements between the US and individual economies whose outcomes remain to be seen at this point.
Long-term implication
“The reduction in our GDP growth forecasts constitute a durable shock to regional growth as US tariffs imply a long-term reduction in global trade,” Mathur said.
In its latest assessment in the region, ANZ considered the latest revisions on both the economies of China and the US.
“We recently downgraded our 2025 GDP growth forecasts for mainland China and US to 4.2 percent and 1 percent, respectively, from 4.8 percent and 1.5 percent previously,” Mathur said.
Revised Asia forecasts
“Our revised Asia growth forecasts for 2025 and 2026, excluding China and India, now stand at 2.9 percent and 3.3 percent, respectively, compared with our earlier forecasts of 3.4 percent and 3.5 percent, respectively,” he added.
The impact of slower growth seen in the US and China is critical, ANZ said, citing trade metrics for Asia.
“For Asia, excluding China, exports to the US rose by around 1 percent of GDP between 2019 and 2024,” Mathur said.
“Malaysia, South Korea, Thailand and Taiwan have significant exposure to global trade while India, Indonesia and the Philippines are less exposed to global trade,” Mathur said.
“The reduction is comparatively higher for the Philippines owing to the lack of any improvement in private capital spending and the fact that a little over 41 percent of inward remittances are from the US. Accordingly, remittances are vulnerable to slower growth in the US,” he added.
The latest data from the Bangko Sentral ng PIlipinas (BSP) showed personal remittances from overseas Filipinos up 2.6 percent at $3.02 billion in February 2025 from $2.95 billion a year earlier.
Compared with the preceding month of January, however, personal remittances in February fell from $3.24 billion. The US accounted for the largest share of cash remittances to the Philippines, followed by Singapore and Saudi Arabia.
