By Katherine K.Chan, Reporter
WASHINGTON, D.C. — The Philippines could regain its economic momentum later this 12 months or by early 2027 if the energy shocks prove temporary and the local investment climate improves, the International Monetary Fund (IMF) said.
In an exclusive interview with BusinessWorld, Krishna Srinivasan, director for Asia-Pacific Department on the IMF, said easing external pressures from the Middle East conflict and recovering domestic demand, particularly investments, could bring the country’s growth to five.8% in 2027.
“So, the idea there can be that if the shock is temporary, then things normalize and the Philippines goes back to a pickup in domestic demand and external demand,” he said on the sidelines of the IMF and World Bank’s Spring Meetings last week.
“If the shock dissipates, you might see the momentum starting later this 12 months and starting of next 12 months,” he added.
The multilateral lender’s Philippine growth outlook for 2027 is significantly faster than its downgraded 4.1% estimate for this 12 months and the 4.4% output recorded last 12 months.
Still, Mr. Srinivasan noted that the Philippines could also be worse off if the conflict intensifies, or by which energy price increases are higher and more persistent in addition to if energy infrastructure takes more hits.
“I believe the danger, all of the numbers I’m quoting are from the reference scenario, which assumes that the shock is temporary. It’s a transient shock. It doesn’t last for that long. It dissipates in a short time,” he said.
“Now, if that doesn’t occur, right, then we’ve got two scenarios within the WEO (World Economic Outlook) where we talked in regards to the undeniable fact that growth could come down by one to 2 percentage points in Asia. And that, in the event you do the numbers of (the) Philippines, I believe it could be far more significant,” he added.
For this 12 months, lingering governance woes from the flood control corruption scandal in late 2025 and potential supply shocks from impending natural disasters are also clouding the expansion outlook for the Philippines.
A widescale controversy linking Public Works officials, lawmakers and personal contractors to corruption behind the federal government’s flood control projects stalled investments, public spending, and household consumption. This dragged the economy last 12 months to its weakest growth because the pandemic.
Meanwhile, Mr. Srinivasan said a fast resolution to the war would also put the Association of Southeast Asian Nations (ASEAN) in position.
Efforts to spice up domestic demand and a pickup in investments once uncertainties over the Middle East war fade could push the region’s gross domestic product (GDP) growth up next 12 months, he added.
In its latest WEO report, the IMF said it sees ASEAN-5, comprised of Indonesia, Malaysia, the Philippines, Singapore and Thailand, expanding by 4.1% this 12 months before improving to 4.4% next 12 months.
“For ASEAN, this can be a highly integrated region,” Mr. Srinivasan said. “So, if the external shocks subside, then you definately will see a fillip from external demand. And in addition in lots of regions where they are attempting to spice up domestic demand, that may start kicking in, whether it’s consumption or investment.”
“If the uncertainty on the earth dissipates, you’d expect investment to choose up, each to service domestic demand and to service external demand,” he added.
FURTHER INTEGRATION
The Philippines took the helm of ASEAN this 12 months, a position Mr. Srinivasan said gives the country a chance to advance regional integration because it shares similar economic woes with its neighbors.
He noted that higher integration would help cushion the region against external shocks.
“If ASEAN integrates more, it’s that far more of a buffer against external shocks. So, you realize, you might have the demand coming from just inside Asia that gives a fillip for investment and consumption,” he said.
Mr. Srinivasan said ASEAN could use this time to strengthen intra-regional trade, financial integration, and digitalization.
“ASEAN can talk in regards to the undeniable fact that at a time when the region has been subject to… trade shocks (and) trade tensions, trade inside the region may be buffer,” he said. “So, the Philippine (chairmanship) of the ASEAN could make that time much more vigorously, (and) to facilitate greater financial integration, greater digitalization. All that might help promote greater integration and greater trade inside the region.”
The 11-member regional bloc must also enhance its domestic revenue mobilization, which the IMF’s APAC chief noted stays low when it comes to its share to GDP, to construct resilience against external shocks.
“When you take a look at countries within the ASEAN, their intake of revenues as a share of GDP is on the lower side, right? And in order that can also be an area where ASEAN as a gaggle can do higher, right, to make themselves more resilient to shocks,” he said.
The Philippines might also push for higher use of the region’s services sector, he added.
Meanwhile, Mr. Srinivasan noted that ASEAN+3’s move to strengthen its regional crisis financing initiative comes timely amid the growing need for stronger trade and financial integration.
He said improving regional integration can even allow the Chiang Mai Initiative Multilateralization (CMIM) to realize more support than up to now.
“Only 20% of (ASEAN’s) trade is accounted for intra-regional trade,” Mr. Srinivasan said. “So, there may be an impetus towards strengthening each trade integration and financial integration, right? And a part of that’s to see what type of support you may provide to countries once they are subject to shocks.”
“And that’s where the CMIM is a vital thing. It complements other features of the worldwide safety net,” he added.
Philippine central bank Governor Eli M. Remolona, Jr. earlier said ASEAN leaders are expanding and strengthening the CMIM a multilateral currency swap arrangement inside the region, to function their safety net amid the crisis.
The CMIM was established by the ASEAN member countries with China, Japan and South Korea following the 1997 Asian Financial Crisis to handle crisis-driven liquidity concerns within the region.