Philippines faces ‘difficult situation’ as Mideast energy shocks weigh on growth

The Philippines is facing a difficult situation as its heavy reliance on oil imports tests its economic resilience amid the ongoing energy crisis from the Middle East war, the International Monetary Fund (IMF) said.   

At a press briefing during the IMF-World Bank Spring Meetings on Wednesday, IMF Managing Director Kristalina Georgieva said the war’s impact on Association of Southeast Asian Nations (ASEAN) member economies is unequal, with energy importers like the Philippines taking more toll.

“For the energy importers, those that have very little to none energy reserves of oil and gas, the situation is much more difficult,” Ms. Georgieva said. “And I very much sympathize with the people in the Philippines because I know that your country does face that difficulty.”

In its latest World Economic Outlook (WEO), the IMF slashed its 2026 gross domestic product (GDP) growth forecast for the Philippines to 4.1% from 5.6% in January, reflecting weaker-than-expected growth in 2025 and the impact of the war in the Middle East. 

The IMF also expects 4.1% growth for the ASEAN-5 region, which is comprised of Indonesia, Malaysia, the Philippines, Singapore and Thailand, this year. It was marginally slower than its 4.2% estimate in January.

Ms. Georgieva noted that the region is “in a bright spot in terms of growth and economic dynamism” but must still strengthen its regional integration to better weather shocks from the war.

“Actually, ASEAN is a bright spot in terms of growth and in terms of economic dynamism,” she said. “When you look at the impact of this shock, because of this strong buildup over the years, ASEAN is actually weathering the shock as a group of countries relatively well.”

Several ASEAN energy exporters may be better positioned to weather these shocks, in contrast to the heavier impact experienced by energy importers in the region, the IMF chief said.

In the Philippines, oil prices have soared since the United States and Israel’s attacks on Iran on Feb. 28. This week saw the first rollback in pump prices, as global oil prices fell amid the temporary ceasefire in the Middle East.

The Philippines is currently under a national state of energy emergency, which President Ferdinand R. Marcos, Jr. announced last month after noting the threats to the country’s energy supply as the war drags on.

PAUSE

In a separate blog published on Thursday, the IMF said the Philippine central bank can stand pat for now to preserve easing space.

“In economies where inflation remains below target, such as Thailand and the Philippines, further rate cuts can be paused to preserve room for easing later,” IMF Asia and Pacific Department Deputy Division Chief Andrea Pescatori and Director Krishna Srinivasan said.

Philippine inflation accelerated to 4.1% in March, breaking the nearly two-year streak of it settling below the Bangko Sentral ng Pilipinas’ (BSP) 2%-4% target.

Before this, the BSP had held its rates steady in an off-cycle meeting even though it raised its full-year inflation projection to 5.1% from 3.6%, as it noted that immediate tightening risks delaying the economy’s rebound.

This paused the central bank’s easing cycle, which began in August 2024, where it delivered a total of 225 basis points in cuts to bring the policy rate to 4.25%.

BSP Governor Eli M. Remolona, Jr. on Tuesday said that the expected economic relief from the government’s ongoing fiscal reforms has opened space for monetary policy tightening.

However, he noted that the central bank is still monitoring incoming data, particularly inflation, for clearer guidance for its upcoming policy review on April 23.

REGIONAL SHOCKS

Meanwhile, Asia’s resilience against last year’s US tariff policies and global trade uncertainty will be shaken as the Middle East conflict stokes inflation, weakens external balances and limits policy options, Mr. Pescatori and Mr. Srinivasan said in the IMF blog.

“Asia entered 2026 on a strong footing,” they said. “Despite the region bearing the brunt of US tariffs last April and persistent trade policy uncertainty, growth was resilient in 2025 and trade remained robust.”

“Now, the war in the Middle East and the ensuing energy supply shock are raising inflation, weakening external balances, and narrowing policy options, underscoring the region’s dependence on imported oil and gas,” they added.

The multilateral lender sees Asia expanding slower at 4.4% this year and 4.2% next year from 5% in 2025.

“Should the shock persist or intensify, as in the WEO’s adverse and severe scenarios, growth through 2027 could be reduced cumulatively by 1% to 2%,” Mr. Pescatori and Mr. Srinivasan added.

Inflation in the region is also expected to quicken to 2.6% by yearend, before easing to 2.4% in 2027. Still, this is faster than the 1.4% clip recorded last year.

“The war introduced a new and more immediate headwind clouding the near-term outlook for Asia, where net oil and gas imports equal about 2.5% of economic output,” the blog read.

Amid this, Ms. Georgieva said the crisis calls for a stronger regional integration among ASEAN countries as it faces shared economic woes.

“The Philippines is now leading the ASEAN. I am going to be there when the meeting takes place,” she said. “And I do believe that this is very important for regions that have the potential to trade more within the countries of the region.”

“Build that integration. You will benefit from it in a more shock-prone world,” Ms. Georgieva added.

Source: Business World

IMF sees slower Philippine growth amid graft scandal, global shocks

The Philippine economy may expand slower until next year as global uncertainties and the local corruption controversy continue to drag growth, the International Monetary Fund (IMF) said.

In its latest World Economic Outlook (WEO) released on Monday, the IMF said it expects Philippine gross domestic product (GDP) to grow by 5.6% this year, within the government’s 5%-6% goal.

This is the same projection given following its Article IV Consultation with the country last December, but slightly lower than its 5.7% estimate in the previous WEO.

At the same time, the IMF cut its Philippine GDP growth forecast for 2027 to 5.8% from its 6% projection in October. This also falls within the government’s 5.5%-6.5% target.

“The downward revision in GDP growth projections for 2026 and 2027 reflects the carryover impact from a downward revision in the IMF’s growth forecast for 2025 — from 5.4% to 5.1% — and a slower pace of capital accumulation,” an IMF spokesperson said.

For 2025, the multilateral lender expected Philippine GDP to grow by 5.1%, unchanged from December forecast. However, this is below its 5.4% forecast given in October.

This came after the flood control corruption mess led to slower economic growth and government spending. In the third quarter, GDP grew by 4% — the weakest growth in over four years. This brought year-to-date GDP growth to 5%.

The IMF said that climate shocks in the latter half of the year also contributed to the economic slowdown.

“The downward revision for 2025 in turn reflects a sharper-than-expected slowdown in Q3 amid recent corruption allegations and climate shocks impacting economic activity in the second half of the year,” it said.

In 2025, the Philippines encountered 23 tropical cyclones, affecting millions of Filipinos and leaving billions of pesos in damages nationwide, according to data from the state weather bureau.

The IMF earlier said that weather disruptions have trimmed the country’s GDP by 0.2%-0.3% yearly and accelerated inflation by up to 0.6 percentage point annually.

The multilateral lender said that lingering uncertainty over tighter trade restrictions, geopolitical tensions, and disruptive financial market corrections could dampen the country’s economic growth.

“On the upside, accelerated implementation of structural and governance reforms can boost investment and FDI (foreign direct investment), increase fiscal multipliers and boost potential growth,” it added.

Meanwhile, the IMF forecasts 6% GDP growth for the Philippines in 2028, at the low end of the government’s 6%-7% target.

“Economic growth will be driven by robust consumption and higher investment, supported by monetary policy easing and the authorities’ recent policy initiatives to support private investment,” the IMF said.

The Bangko Sentral ng Pilipinas (BSP) has been on an easing path since August 2024, having delivered a total of 200 basis points (bps) in cuts.

In October and December last year, it slashed the key policy rate by 25 bps each in a move to spur domestic demand amid waning consumer and investor sentiment due to the flood control mess.

The benchmark interest rate now stands at an over three-year low of 4.5%, which the central bank said is already close to their ideal rate, signaling an end to its current easing cycle.

BSP Governor Eli M. Remolona, Jr. has left the door open to another 25-bp cut at their Feb. 19 review but said that further easing may be unlikely considering current economic data.

Still, he noted that a weaker-than-expected growth may prompt them to deliver two rate cuts this year to help stimulate the economy.

Source: Business World

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