IMF cuts Philippines growth forecast amid challenges

Philippine economic growth is expected to moderate this year and in 2026 amid ongoing trade uncertainties and geopolitical tensions across the globe, the International Monetary Fund (IMF) said.

The IMF trimmed its Philippine growth forecast to 5.4% for this year, slightly lower than its 5.5% projection in July.

If realized, gross domestic product (GDP) growth will be at the low end of the National Government’s 5.5-6.5% target band this year.

For 2026, the IMF also cut its growth forecast to 5.7% from 5.9% previously. However, this is below the government’s 6-7% target for next year.

The IMF said the economy is expected to remain resilient, but downside risks warrant “close attention.”

“Risks to the growth outlook are tilted to the downside. The main external risks stem from prolonged global trade policy uncertainty, geopolitical tensions, and disruptive financial market corrections,” IMF Mission Head Elif Arbatli Saxegaard said at a briefing after the conclusion of the 2025 Article IV Consultation with the Philippines on Wednesday.

“On the domestic front, more frequent and intense climate shocks would cause notable macroeconomic losses. On the upside, accelerated implementation of structural and governance reforms would support investor confidence and the fiscal multiplier and raise potential growth. Risks around inflation are broadly balanced.”

Ms. Saxegaard said the growth outlook was revised to reflect the weaker-than-expected growth in the first half.

For the first half, GDP growth averaged 5.4%, slower than the 6.2% a year ago.

Ms. Saxegaard said growth will be affected by the higher tariffs imposed by the US on Philippine goods. The US began imposing a 19% tariff on goods from the Philippines on Aug. 7.

“It will weigh on exports and investment,” she said.

She also noted growth will be “supported by monetary easing and recent legislative measures to promote private investment.”

Meanwhile, the IMF sees inflation averaging 1.6% this year, before picking up to 2.6% next year.

“The pickup in inflation is expected to be driven by (the) food and transport crisis,” Ms. Saxegaard said. “And that reflects essentially the decline in negative base effects that have been dragging down inflation this year. So, as those base effects recede, we expect a pickup.”

She said core inflation is expected to “remain muted” at 2.5% in 2026.

“The BSP (Bangko Sentral ng Pilipinas) has room for a slightly more accommodative stance to help bring inflation back to the target faster and reduce economic slack amid elevated downside risks to growth,” Ms. Saxegaard said. “Policy will need to remain data dependent amidst prevailing uncertainties around the output gap and the neutral rate, and two-sided risks to inflation.”

On Aug. 28, the central bank slashed its key interest rate by 25 basis points (bps) for a third consecutive time to 5%. It has cut the benchmark by a total of 150 bps since August last year.

CORRUPTION

Asked about recent corruption scandals involving some government projects, Ms. Saxegaard said the IMF will continue to monitor the developments.

“It’s not yet clear whether and how these allegations will impact investor and private sector confidence, as well as their perceptions and behavior,” she said.

The IMF welcomed recent reforms to reduce infrastructure gaps and promote foreign direct investment, but effective implementation is key.

“Enhancing fiscal governance and the rule of law and reducing corruption vulnerabilities are critical for inclusive and sustainable growth,” Ms. Saxegaard said.

The IMF urged the Philippine government to continue implementing gradual fiscal consolidation “to replenish fiscal buffers and support external balance.”

“The authorities should consider implementing concrete and durable tax measures to limit the need for restraint in priority spending which tends to have a larger impact on growth and disproportionately impacts the vulnerable,” she said.

Ms. Saxegaard suggested several tax measures including monitoring the cost of tax incentives and improving the efficiency of the value-added tax (VAT).

“On the tax administration side, better or enhanced use of data analytics and compliance risk management would, in our view, help support revenue mobilization,” she said. “On tax policy options, there are several measures that would have positive benefits. We do think that also monitoring the cost of tax incentives would be desirable as well as enhancing the efficiency of the VAT.”

Meanwhile, Ms. Saxegaard said that risks to the country’s financial system remain moderate as the banking sector has strong capital and liquidity buffers.

“Nonetheless, vulnerabilities in the real estate sector, strong bank interconnectedness with complex conglomerate structures, and fast-growing consumer credit warrant close monitoring,” she added.

The IMF Staff Report will be released between November and early December this year.

Source: Business World

Uncertainties seen tempering PH growth

Philippine economic growth will likely slow this year due to external headwinds, the Asian Development Bank (ADB) reiterated on Tuesday as it kept its forecast for 2025 and lowered that for next year.

In the September edition of its Asian Development Outlook (ADO), the Manila-based lender maintained the 2025 gross domestic product (GDP) growth projection announced in a July supplement. It was a higher 6.0 percent in the April ADO.

If realized, GDP growth will have slowed from last year’s 5.7 percent but hit the government’s downwardly revised 5.5- to 6.5-percent target. The 2024 result, which fell below the 6.0- to 6.5-percent goal for that year, was attributed in part to a series of typhoons.

Unilateral tariff increases initiated by US President Donald Trump and heightened geopolitical tensions, meanwhile, prompted the government to lower its 2025 and 2026-2028 targets in June.

While the ADB forecast for this year falls within the updated range, that for 2026 — a reduced 5.7 percent compared to the 5.8 percent in June and 6.1 percent in April — is lower than the new 6.0- to 7.0-percent target.

“External headwinds and heightened uncertainty over global economic policies have weighed down trade and investment prospects,” ADB Country Director Andrew Jeffries told a briefing.

A 19-percent tariff rate levied by the US on Philippine exports, which took effect in August, is expected to have an impact on outbound shipments. However, solid domestic demand — seen remaining the main engine of growth — should provide an offsetting effect.

The rate — down from the 20 percent threatened in July but higher than the 17 percent announced in April — is seen as offering little in terms of a strategic trade advantage over neighboring Southeast Asian economies.

Still, the ADB said that Philippine growth would remain strong and Jeffries said “sustained government investments, including for social services, is seen boosting domestic demand.”

“The Philippines’ growth outlook remains resilient amid a global environment of shifting trade and investment policies and heightened geopolitical uncertainties,” he added.

“Though these uncertainties pose increased risk, we see strong domestic demand anchoring growth, with sustained investments and an accommodative monetary policy supporting the economy’s expansion.”

Asked whether an ongoing corruption scandal would have an impact, Jeffries said: “We didn’t see a reason at this point in time to reduce those GDP projections due to that issue.”

“But it’s certainly a heightened risk,” he added.

“Between now and our December update, there may be more quantifiable data available that may alter our projections.”

Jeffries said that while the ADB takes “corruption and public financial management very seriously,” it is also mandated to “support our developing member country governments and to help solve complicated projects, not to shy away from helping solve such projects.”

“We have very strong due diligence on the financial management capabilities of our borrowers and any gaps found are built into the project to mitigate financial management risks.”

He added that the ADB requires audited, project-level financial statements from approved auditors for ongoing expenses. Loan disbursements are also strictly monitored to ensure that funds are released only when contracted construction milestones are met.

“So we take this very seriously and... we actually see potentially more support being asked of us to help address this problem going forward,” Jeffries said.

Source: Manila Times

Central Visayas is Philippines fastest-growing regional economy – DOF

Cebu is well positioned to benefit from the country’s positive economic prospects, citing its role as one of Asia’s leading outsourcing hubs and a crucial trade gateway linking Luzon, Visayas and Mindanao to international markets, according to the Department of Finance (DOF).

Finance Secretary Ralph Recto said the region remains an economic powerhouse of Central Visayas, which is the fastest-growing regional economy in the country over the last two years, with growth of 7.3 percent.

“This outpaced the national average growth of 5.9 percent since the start of the Marcos administration in 2022, the fastest in Asia and almost double the global rate,“ the DOF said.

Meanwhile, the 35-kilometer Cebu Bus Rapid Transit is set to be fully completed by 2030. The mass transit line is expected to serve over 160,000 passengers per day once completed, but it is beyond the initial scheduled 2028 opening of the bus route.

“The country’s strong economic fundamentals will also strengthen Cebu’s global dominance in shipbuilding, furniture and food processing industries,” the DOF said.

Recto said DOF officials in Cebu  are in full support of accelerating the city’s growth and digitalization, enhancing revenue collections and improving public services, highlighting the Bureau of Local Government Finance’s role.

He also noted that local governments could access financing from the Land Bank of the Philippines and the Development Bank of the Philippines, adding that the interest rate cuts delivered by the Bangko Sentral ng Pilipinas are expected to lower borrowing costs for local government units’ development projects.

According to Recto, the Bureau of Internal Revenue and the Bureau of Customs have to collect P8.8 billion a day and P3 billion daily, respectively.

From January to August, Port of Cebu’s collection went up by over seven percent to P31.71 billion, reflecting a strong trade activity and improved revenue performance.

Likewise, Cebu’s regional district office has collected P13.1 billion, 12.3 percent higher than last year.

Source: Inquirer