Trade tensions, climate shocks to weigh on Philippines growth
MANILA, Philippines — The International Monetary Fund (IMF) flagged mounting downside risks to the Philippine economy stemming from escalating global trade tensions, persistent policy uncertainty and climate-related shocks.
In a statement to The STAR, the multilateral lender warned that growth momentum could be dampened by both external and domestic headwinds over the next two years.
“The main downside risks to growth include an escalation of trade measures, prolonged uncertainty and geopolitical tensions. Extreme climate events and other natural disasters also constitute downside risks,” the IMF said.
“On the upside, accelerated implementation of structural reforms and a reduction in infrastructure gaps can contribute to higher growth over the medium-term,” it added.
The IMF maintained its 2025 gross domestic product (GDP) growth projection at 5.5 percent for the Philippines, slightly slower than the 5.7 percent expansion seen in 2024.
The unchanged forecast reflects mixed developments: higher growth from key trading partners offset by a weaker-than-expected first quarter outturn and elevated energy prices.
The economy is forecast to expand by 5.9 percent in 2026, supported by strong domestic demand and investment, alongside a more relaxed monetary policy stance.
The IMF said the slight 0.1-percentage-point upward revision to its 2026 forecast was driven in part by the government’s decision to delay some fiscal consolidation under its revised Medium-Term Fiscal Framework.
However, this could be tempered by the lingering effects of uncertainty on private sector demand.
The IMF also lowered its inflation forecast for the Philippines to 1.8 percent in 2025, below the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target. The latest forecast is a downward revision of 0.8 percentage points from its May forecast of 2.6 percent, reflecting the lower-than-expected inflation outturn in the first half.
“Monetary policy has room to be more accommodative amid a benign inflation outlook,” the IMF said. It added that a data-dependent approach and clear communication will be key in navigating the two-sided risks to inflation, especially amid geopolitical volatility and potential supply chain disruptions.
As for the recently announced US-Philippines trade agreement, the IMF said it has yet to fully assess its implications.
“As this is still an initial agreement, we have not yet conducted a detailed assessment of its potential impact,” the IMF said, noting that a more comprehensive analysis would be included in the Philippines’ next Article IV consultation set in the fourth quarter.
Despite near-term challenges, the IMF noted that accelerated structural reforms and efforts to close infrastructure gaps could help boost the country’s medium-term growth trajectory.
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