‘Philippines has limited room for broad subsidies’

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April 18, 2026 | 12:00am

MANILA, Philippines — The Philippines has limited fiscal space to roll out broad-based subsidies as it navigates the economic fallout from global shocks, with the International Monetary Fund (IMF) urging authorities to focus instead on targeted support.

Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said countries like the Philippines must be mindful of shrinking fiscal buffers after years of successive crises. 

“Over the years, countries have lost buffers. And so they have to be that much more cognizant of the fact that buffers are lower,” Srinivasan said during a regional economic briefing.

“For providing support, we keep harping on the point about providing targeted support… because buffers have come down, and we don’t know how long this shock will last,” he added.

The IMF official emphasized that this approach is particularly relevant for the Philippines, where public debt remains elevated at around 60 percent of gross domestic product, limiting the government’s ability to sustain wide-ranging subsidies such as fuel aid or tax suspensions.

“Use your buffers in a very efficient way. And that’s what is important for the Philippines,” Srinivasan said.

The policy warning comes as the IMF sharply downgraded the Philippines’ growth outlook for 2026, citing both domestic and external headwinds. 

In its latest World Economic Outlook, the IMF cut its growth projection for the Philippines to 4.1 percent for 2026 from 5.6 percent previously, while maintaining its 5.8 percent forecast for 2027.

Srinivasan said economic momentum entering the year was already weak, weighed down by investor sentiment linked to governance concerns. 

“The country’s sentiment is still weak given the governance issues with the flood control projects… so that was already weighing on sentiment across investors,” he said.

This was compounded by the impact of the ongoing Middle East conflict, which has driven up global energy prices. He noted that the
Philippines is particularly vulnerable due to its dependence on imported fuel.

“Philippines is a very energy-intensive economy. It relies a lot on imports. So the shock has a significant bearing on prospects in the Philippines,” he added.

Despite the near-term slowdown, the IMF expects the Philippine economy to recover in 2027, suggesting that the current drag may be temporary if global conditions stabilize.

Still, Srinivasan cautioned that uncertainty remains high, particularly given the unpredictable duration and intensity of the geopolitical shock.

Against this backdrop, the IMF reiterated the need for prudent and well-targeted policy responses to protect vulnerable sectors without undermining fiscal sustainability.