By Luisa Maria Jacinta C. Jocson, Senior Reporter
THE INTERNATIONAL Monetary Fund (IMF) slashed its gross domestic product (GDP) growth projections for the Philippines from this yr to the following, reflecting heightened global uncertainty arising from US tariff policy.
In its latest World Economic Outlook (WEO), the IMF downgraded its GDP growth forecast for the Philippines to five.5% this yr from the 6.1% projection in its January update.
It also lowered its 2026 forecast to five.8% from 6.3% previously.
These would fall below the federal government’s 6-8% growth targets for this yr to 2026.
The IMF said its forecasts consider the weaker-than-anticipated Philippine growth within the fourth quarter, in addition to external headwinds stemming from heightened trade tensions and policy uncertainty.
“Downward revisions to growth for 2025 and 2026 are observed throughout the region and globally, reflecting the recent external developments,” an IMF spokesperson said in an e-mail.
These include the “direct impact of upper tariffs on the Philippines’ goods exports to the US, downward revisions to trading partners’ growth, and impact of upper uncertainty and financial tightening,” it said.
US President Donald J. Trump on April 2 announced a barrage of reciprocal tariffs on nearly all of its trading partners, with a baseline rate of 10%.
While a lot of the higher reciprocal tariffs have been suspended until July, the baseline 10% tariff continues to be in effect.
The Philippines was slapped with a 17% tariff rate on its exports to the US, the second lowest in Southeast Asia.
The IMF said its WEO forecasts are based on information available as of April 4 and are subject to “significant uncertainty.”
Nevertheless, the IMF said the Philippine economy is seen to stay somewhat resilient.
“Despite a harder environment, growth within the Philippines is anticipated to stay relatively robust in 2025,” it said.
The IMF’s forecast for the Philippines places it because the second-fastest growing economy in emerging and developing Asia this yr, just behind India (6.2%).
The region is projected to grow by 4.5% this yr and 4.6% in 2026, as Southeast Asian countries are amongst probably the most affected by the US tariffs.
In Southeast Asia, the Philippines has the fastest-projected GDP growth forecast this yr. It’s ahead of Vietnam (5.2%), Indonesia (4.7%), Malaysia (4.1%) and Thailand (1.8%).
“On the upside, recent legislative reforms could facilitate an accelerated implementation of domestic infrastructure projects, including through public-private partnerships, and result in higher foreign direct investment (FDI) and investment,” the IMF said.
“When it comes to growth drivers, domestic consumption stays the important thing driver for growth and is anticipated to be supported by lower inflation and low unemployment,” it added.
Meanwhile, the multilateral institution said it expects headline inflation within the Philippines to average 2.6% this yr and a pair of.9% in 2026, well throughout the central bank’s 2-4% goal band.
“Relative to January WEO, the headline inflation projection for 2025 has been revised down by 0.2 percentage point (ppt) to 2.6%.”
This reflects the “lower-than-expected inflation outturn in the primary quarter, and downward revisions to global fuel and food price projections.”
The most recent data from the local statistics agency showed inflation slowed to 1.8% in March, its slowest rate in nearly five years. This brought average inflation to 2.2% in the primary quarter.
Accounting for risks, the central bank sees inflation averaging 2.3% in 2025 and three.3% in 2026.
The IMF said risks to the inflation outlook are “broadly balanced.”
“On the upside, potential disruptions in global supply chains and trade restrictions can raise imported inflationary pressures, while risk-off shocks could contribute to currency depreciation.”
“The Philippines’ exposure to extreme climate events also poses additional inflationary risks. On the downside, risk of weaker global demand prospects could pose deflationary risks, including through lower commodity prices.”
Meanwhile, the IMF said the Bangko Sentral ng Pilipinas (BSP) has room to further lower rates of interest and “firmly move to a neutral stance.”
“With inflation projected to stay across the BSP’s goal of three%, inflation expectations well-anchored, and amid an expected widening of the output gap, there may be space for a more accommodative stance.”
The Monetary Board earlier this month resumed its rate-cutting cycle with a 25-basis-point (bp) rate cut, bringing the benchmark to five.5%.
BSP Governor Eli M. Remolona, Jr. has said they are going to likely proceed cutting rates further this yr in “baby steps” or increments of 25 bps.
There are 4 more Monetary Board policy meetings this yr, with the following slated for June 19.
“Amidst prevailing uncertainty and with each upside and downside risks to inflation, a data-dependent approach, and clear and effective communication around policy settings might be essential to administer expectations and supply clarity on the BSP’s response function,” the IMF added.
‘NEGATIVE SHOCK TO GROWTH’
Meanwhile, the IMF expects global growth to slow to 2.8% this yr and to get well to three% in 2026, reflecting “the direct effects of recent trade measures and their indirect effects through trade linkage spillovers, heightened uncertainty, and deteriorating sentiment.”
The brand new forecasts are lower than the three.3% projection for each years within the January WEO update.
Trade uncertainties have “surged to unprecedented levels,” the IMF said in the newest report.
“The swift escalation of trade tensions and very high levels of policy uncertainty are expected to have a big impact on global economic activity,” it added.
The US is anticipated to grow by 1.8% this yr, 0.9 percentage point lower than the previous projection “on account of greater policy uncertainty, trade tensions and softer demand momentum.”
“Tariffs are also expected to weigh on (US) growth in 2026, which is projected at 1.7% amid moderate private consumption,” the IMF said.
The IMF also lowered projections for Canada, Japan and the UK.
For China, it downgraded its growth outlook to 4% this yr from 4.6% previously resulting from the impact of the US tariffs. It also lowered its 2026 China forecast to 4% from 4.5% previously.
The tariffs and consequent countermeasures alone are a “major negative shock to growth,” it added.
“The unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook and, at the identical time, makes it more difficult than usual to make assumptions that will constitute a basis for an internally consistent and timely set of projections.”
Global inflation can be seen to ease at a slower pace than initially expected, the IMF said.
It also flagged “intensifying downside risks” on global output.
“Ratcheting up a trade war, together with much more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks.”
“Divergent and rapidly shifting policy stances or deteriorating sentiment could trigger additional repricing of assets beyond what took place after the announcement of sweeping US tariffs on April 2 and sharp adjustments in foreign exchange rates and capital flows, especially for economies already facing debt distress.”
Moving forward, the IMF said there may be a necessity for “clarity and coordination.”
“Countries should work constructively to advertise a stable and predictable trade environment, facilitate debt restructuring, and address shared challenges.”
“At the identical time, they need to address domestic policy and structural imbalances, thereby ensuring their internal economic stability. This may help rebalance growth-inflation trade-offs, rebuild buffers, and reinvigorate medium-term growth prospects, in addition to reduce global imbalances,” it added.
