PH to miss 2025, 2026 growth goals, says IMF

THE International Monetary Fund (IMF) has trimmed its Philippine economic growth forecasts and now expects targets for this year and the next to be missed given a challenging global environment.

"The IMF has revised down the growth forecast for 2025 ... reflecting the lower-than-expected 2024 fourth quarter growth outturn and external developments," a spokesman said in an email to reporters on Tuesday.

This includes the direct impact of "higher tariffs on the Philippines' goods exports to the US, downward revisions to trading partners' growth and impact of higher uncertainty and financial tightening."

In its latest World Economic Outlook, the IMF revised the country's 2025 growth outlook to 5.5 percent from 6.1 percent. That for 2026 was also lowered to 5.8 percent from 6.3 percent.

Both projections fall below the government's 6.0- to 8.0-percent target and, if realized, mean four straight years of below-target growth beginning in 2023.

The Washington-based IMF also said that downward revisions were made throughout the region and globally, reflecting recent external developments.

"It is also important to note that the forecast is subject to significant uncertainty," the IMF spokesman said.

"On the upside, recent legislative reforms could facilitate an accelerated implementation of domestic infrastructure projects, including through public-private partnerships, and lead to higher FDI (foreign direct investments) and investment," the official added.

"In terms of growth drivers, domestic consumption remains the key driver for growth and is expected to be supported by lower inflation and low unemployment."

The multilateral lender expects inflation to average 2.6 percent this year, slightly lower than the earlier forecast of 2.8 percent, due to easing food and fuel prices and a softer-than-expected start to the year.

Consumer price growth is also expected to stay within the target range at 2.9 percent in 2026, down from the previous 3.0-percent forecast, and the IMF noted that the risks to the outlook were 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 spokesman said.

"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," it added.

Given the outlook, the IMF said the Bangko Sentral ng Pilipinas (BSP) had room to cut its policy rate further and shift toward a neutral monetary stance.

"With inflation projected to remain around the BSP's target of 3 percent, inflation expectations well-anchored, and amid an expected widening of the output gap, there is space for a more accommodative stance," it said.

However, it cautioned that the BSP must remain data-dependent and maintain clear communication to manage market expectations and ensure policy direction transparency.

The BSP earlier this month resumed trimming its benchmark interest rate, implementing a quarter-point cut to 5.50 percent. Further reductions are likely this year, central bank Governor Eli Remolona Jr. has said, if inflation continues to ease and economic conditions warrant support.