Philippine economy remains resilient, IMF says
AFP FILE PHOTO
MANILA, Philippines — The International Monetary Fund said the Philippine economy remains resilient despite external challenges. However, the IMF but flagged slower growth prospects in the near term due to subdued global demand and lingering uncertainties.
In a statement on Friday following a weeklong mission in Manila, IMF mission chief Elif Arbatli Saxegaard said that the Philippines is largely shielded from the direct impact of newly announced US tariffs. Still, broader global headwinds are expected to weigh on the country’s economic expansion. These include slower growth in major economies and heightened policy uncertainty.
“However, growth is projected at 5.5 percent in 2025, slightly lower than previous government estimates, and 5.8 percent in 2026,” said Saxegaard. She led the consultation which ran from May 14 to 20.
She added that domestic consumption is expected to benefit from easing monetary policy. And yet, lower inflation and historically low unemployment, private investment remains subdued, and risks to the economic outlook are skewed to the downside.
IMF sees balanced risks
The IMF official also said that the Bangko Sentral ng Pilipinas (BSP) has room to further cut its benchmark interest rate. This is so given that inflation has slowed considerably, dropping to 1.4 percent in April 2025. That is thanks to last year’s rice tariff cuts and government administrative measures.
READ: Bangko Sentral ng Pilipinas sees at least two more rate cuts in 2025
Saxegaard added that core inflation was also subdued at 2.2 percent. This reflects easing price pressures across a broader range of goods and services. It reinforces expectations that overall inflation will remain within target for the rest of the year.
With inflation expectations well-anchored, she said inflation was projected to stay near the lower end of the target band at 2.2 percent in 2025. She also said that risks are broadly balanced.
“Risks of higher inflation include adverse weather and other supply shocks, including potential disruptions in global supply chains, and risk-off shocks which could contribute to currency depreciation,” she said.
Despite lower inflation, the IMF official flagged potential risks that could push prices higher. These include global supply disruptions, weather-related shocks, and a weakening peso.
Weaker demand
At the same time, she said softer global demand and lower commodity prices could bring deflationary pressures.
On the external front, she noted that the current account deficit is projected to narrow to 3.4 percent of gross domestic product (GDP) in 2025. This comes from 3.8 percent in 2024, aided by falling commodity prices.
International reserves, though down from a September 2024 peak, remain ample at $105.3 billion as of April, according to Saxegaard.
On the plus side, she said that fiscal performance has improved.
The deficit shrank from 6.1 percent of GDP in 2023 to 5.7 percent last year. It is expected to remain broadly stable in 2025.
The IMF also stressed that medium-term fiscal consolidation remains critical. It urged the government to pursue tax reforms to boost revenues.
“Tax reforms could prioritize raising excise taxes, enhancing (value-added taxes) efficiency, improving tax administration, and ensuring effective control of tax incentives,” Saxegaard said. She added that capacity-building at the local government level is needed as more resources are devolved.
She said that the financial system also remains stable, with strong capital and liquidity buffers. However, the IMF warned of growing risks from banks’ exposure to real estate and rising consumer credit.
