IMF downgrades 2025 growth forecast for Philippines to 5.1%

MANILA, Philippines, December 22 ------ The International Monetary Fund (IMF) lowered its growth forecast for the Philippines amid an ongoing corruption scandal that has weighed on the economy and magnified the impact of lingering global headwinds.

In its latest country report, the IMF said it expected the Philippine economy to grow by an average of 5.1 percent this year, down from its 5.4 percent projection in October, after third-quarter growth fell to a four-year low of 4 percent amid a sweeping antigraft crackdown. If realized, this would mark a deceleration from the 5.7-percent average expansion in 2024.

For next year, the Fund projected growth to recover to 5.6 percent, though that, too, was weaker than its previous estimate of 5.7 percent. Taken together, the revised outlook suggested growth may fall short of the Marcos administration’s 5.5- to 6.5-percent target for this year and remain below the 6- to 7-percent goal for 2026 until 2028.

The pared-back estimates also undershoot the IMF’s view that the Philippines has the potential to grow by about 6 percent over the medium term. The Fund warned that higher US tariffs on Filipino exports remain a key external risk that could weigh on investment, a concern compounded by the deepening graft investigation at home.

The IMF likewise flagged more frequent and intense climate shocks, which could cause notable macroeconomic losses. “The authorities note that the recent governance problems may weigh on confidence and investment in the near-term, but they are confident that ongoing legislative and structural reforms will boost private investment over the medium-term,” the IMF said. “Accelerated implementation of structural and governance reforms would support investor confidence and raise fiscal multipliers and potential growth,” it added.

President Marcos’ economic team earlier signaled that official macro targets may need to be revised to account for the fallout from an escalating antigraft drive. The probe has widened to include lawmakers, Cabinet members, government engineers and private contractors, hitting confidence and squeezing public spending at a time when the economy is counting on domestic demand to cushion against mounting global risks.

Looking ahead, the IMF still expected the country to realize its growth potential. The fund predicted the economy would expand by 6.1 percent in 2027 and by 6 percent in 2028, an election year. Inflation is also seen staying within the 2- to 4-percent target range of the Bangko Sentral ng Pilipinas (BSP), which should allow the BSP to maintain a low-interest rate environment to support economic activity. “Directors agreed that the monetary policy stance should remain accommodative amid elevated downside risks to growth and inflation expectations, and welcomed the authorities’ data dependent approach,” the IMF said. “Directors urged the authorities to continue to allow the exchange rate to play its role as a shock absorber with any interventions used on a temporary basis to address disorderly market conditions. They encouraged continued efforts to deepen capital markets and enhance monetary policy transmission,” it added.

Source: inquirer.net