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December 15, 2025 | 1:45pm
File photo of the building of the International Monetary Fund.
AFP / File
MANILA, Philippines — The International Monetary Fund (IMF) has downgraded its economic growth projections for the Philippines, citing performance that was weaker than expected in 2025 and global and domestic risks.
After the 2025 Article IV consultation with the Philippines, the IMF said that it expects economic growth by 5.1% in 2025, lower than the earlier forecast of 5.4%, as rising tariffs weigh on exports and investment.
Growth is projected to pick up modestly to 5.6% in 2026, also revised downward, after a sharper-than-anticipated slowdown in the third quarter of 2025. This outlook is lower than the earlier October projection by the IMF of 5.7%.
RELATED: IMF sees steady growth for Philippines
The downgrade from previous forecasts is attributed by the IMF to a sharper-than-anticipated slowdown observed in the third quarter of 2025.
Slower growth in 2025. The IMF said gross domestic product growth slowed sharply to 4% year-on-year in the third quarter of 2025, driven by weaker growth in capital formation and private consumption.
Growth had reached 5.7% in 2024, supported by strong public consumption and investment, before easing to 5.4% in the first half of 2025. The slowdown was partly due to strong imports and an election-related ban on public spending.
“Potential growth is estimated to be around 6.0% over the medium term," the IMF said.
Inflation, meanwhile, is projected to average 1.7% in 2025, before rising to 2.8% in 2026 as negative base effects fade.
External position, risks. The country’s current account deficit widened to 4.0% of GDP in 2024, reflecting weak exports and higher outbound tourism.
The IMF expects the deficit to narrow to 3.8% in 2025 and 3.4% in 2026, supported by lower commodity prices.
The fund said the near-term growth outlook is tilted to the downside.
Key external risks include prolonged uncertainty over global trade policy, intensifying geopolitical tensions, and the possibility of disruptive financial market corrections.
Domestically, the IMF warned that more frequent and severe climate shocks pose a significant threat, potentially resulting in substantial macroeconomic losses.
Meanwhile, the outlook holds potential upside risks, particularly if the implementation of structural and governance reforms is accelerated, as this would boost investor confidence, raise fiscal multipliers, and elevate potential growth.
Policy advice, reforms. IMF Directors agreed that monetary policy should remain accommodative, given elevated downside risks to growth and well-anchored inflation expectations, while allowing the exchange rate to act as a shock absorber.
They also called for closer monitoring of financial sector vulnerabilities, particularly in real estate, bank conglomerates, and fast-growing consumer credit.
The IMF welcomed reforms to improve the business environment and the Philippines’ exit from the Financial Action Task Force grey list.
It also stressed the importance of strengthening governance and the rule of law, mitigating corruption risks, and enhancing human capital and workforce skills to support “inclusive and sustainable growth.”
